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28 July 2015: Workplace Relations Update for Executives On-the-Go

Criminal charges cleared against an Officer for alleged WHS breaches

In a blog last year we wrote about the first charges to be laid against an ‘officer’ under the harmonised Work Health and Safety Act 2011 (WHS Act) in relation to a workplace incident that occurred in 2012.

In an important development, the charges against Mr al-Hasani as an ‘officer’ of Kenoss Contractors Pty Ltd, have now been dismissed, as the ACT Industrial Magistrate held that Mr al-Hasani did not have a sufficient level of control or influence to be an “officer” within the meaning of the legislation.

The case: a refresh

In R v Kenoss Contractors Pty Ltd [2014] criminal charges were brought against both the company Kenoss Contractors Pty Ltd (Kenoss) and Mr al-Hasani as an officer of the company in the ACT Industrial Court for serious safety breaches which led to the death of a truck driver using their dump site. The company went into liquidation but was nevertheless found guilty of the offences.

The incident that gave rise to the charges involved the fatal electrocution of a truck driver (not an employee of Kenoss) when the elevated trailer on the tip truck he was operating at a road resurfacing project dump site touched a live power line above. The area was under the control of Kenoss, and while their employees had been verbally alerted to the dangers, that appeared to be the extent of the control measures relating to what was a very serious hazard.

The prosecution alleged that verbal instructions were not adequate and that more tangible safety measures needed to be taken to counteract the risk. A series of basic safety breaches were alleged to have contributed to the worker’s death including that:

  • there were no warning signs or flags anywhere to alert workers to the presence of live power lines;
  • there was no spotter to help the worker dump the load safely; and
  • the power had not been turned off, something that can and should be done.

Even though the Industrial Magistrate considered that Mr al-Hasani had breached his safety duty of care as an employee, as he had only been charged in his capacity as an officer, she held that the prosecution had not proved that he had a large enough level of control or influence in the company for him to meet the definition of an ‘officer’ under the Corporations Act 2001 (Cth) (Corporations Act). On that basis she dismissed the charge against him.

What is required of an ‘officer’?

Under the WHS Act the term ‘officer’ can include directors, company secretaries and others who make, or participate in making, decisions that affect the whole, or a substantial part, of the company.

The Act requires officers to exercise due diligence to ensure that the organisation (or Person Conducting a Business or Undertaking, PCBU) meets its obligations under the WHS Act. The duty of due diligence specifically requires an officer to take reasonable steps to:

  • acquire and possess current knowledge of work health and safety matters;
  • gain an understanding of the nature of the operations and any hazards and risks the operations may include;
  • ensure that the PCBU has available resources and processes and uses them appropriately to minimise risks to health and safety;
  • ensure that the PCBU has processes for receiving and considering information regarding incidents, hazards and risks and responding in a timely manner;
  • ensure that the PCBU has, and implements, processes for complying with any duty or obligation the PCBU is required to uphold; and
  • verify that those processes are implemented.

Failure to do so can attract a maximum penalty of $300,000, up to 5 years imprisonment, or both.

It is important to note that all workers are accountable under the WHS Act for their own health and safety and any actions that adversely affect others in the workplace, but the duty is far greater for officers, given their much higher capacity to make and keep workplaces safe.

The bottom line

Although the case has finally come to a close in favour of Mr al-Hasani, companies and senior operatives in a company must remain vigilant to their obligations under the WHS Act.

If convicted, Mr al-Hasani could have been fined $300,000 and left with a criminal record.


Employee who drunkenly abused bosses unfairly dismissed

The Fair Work Commission (the Commission) has found that an employee who sexually harassed colleagues and told his boss to ‘f—k’ off at the company Christmas party and subsequent partying, was unfairly sacked.

The Commission’s decision made findings on a number of significant issues which led to the eventual outcome of unfair dismissal. The full decision of the Commission can be accessed here.

The party and the hangover

Stephen Keenan was a team leader at a Leighton’s joint venture project. He attended Leighton’s Christmas function on 12 December 2014, at a venue away from the workplace, where free alcohol was provided to the joint venture staff, served by venue staff (they were not Leighton’s employees). After the function finished, Keenan and a number of other employees moved on to a nearby bar where they continued to party.

Over the next few days Keenan’s employer Leighton Boral Amey NSW Pty Ltd (Leighton) received a number of complaints against him from other employees. The allegations against Mr Keenan from witnesses included that at the Christmas party and at the subsequent party he engaged in:

  • inappropriate behaviour and language, including aggressive, intimidating and bullying behaviour towards the employee who had organised the function;
  • a number of instances of sexual harassment of co-workers, which took place at the Christmas function, then in the bar where some of the party-goers went after the Leighton’s function, and at a taxi stand after the post-party partying broke up; and
  • bullying.

Leighton conducted an internal investigation into Keenan’s behaviour at the function and the subsequent events, identifying alleged incidents of misconduct by Mr Keenan, namely bullying and sexual harassment.

Leighton consequently dismissed Mr Keenan, after first giving him an opportunity to respond to the allegations and to a penalty of dismissal.


The Vice President found that the dismissal was harsh, after he disregarded those allegations which occurred between Mr Keenan and other employees after the Christmas function. With the remaining allegations, he found dismissal to be grossly disproportionate to the misconduct, given that there were no lasting consequences  in the workplace, Mr Keenan’s good employment record, and similar behaviour by another co-worker who was not dismissed.

Significant Outcomes for Employers

One of the key findings was that Leighton’s, as the employer, was not vicariously liable for Mr Keenan’s harassment of other staff at any of the after-party events, as they were insufficiently related to work. And as they were not liable, therefore they were not able to point to any misbehaviour by Mr Keenan after he left the Christmas party, as being work-related misconduct.

While this appears to be at odds with an employer’s workplace health and safety/workers compensation responsibilities, this does bring a measure of comfort that there are limits to an employers’ responsibilities for staff after hours behaviour. The Vice President found:

“I do not consider that conduct which occurred at the upstairs bar [after the Christmas party] can be said to be in connection with Mr Keenan’s employment. The social interaction which occurred there was not in any sense organised, authorised, proposed or induced by [the employer]. Those who gathered there did so entirely of their own volition. It was in a public place. There was nothing in LBAJV’s Code of Conduct or relevant policies which suggested that they had any application to social activities of this nature.”

Not quite surprising was the Commission’s finding that where the function was connected to employment, such as the Christmas party, it was incumbent upon the employer to provide managerial supervision. Naturally this included the responsibility to take steps to ensure the responsible service of alcohol, and in particular that alcohol was not served to staff who appeared to be intoxicated and behaving badly.

Final Note

Before employers get too excited about the ramifications of what is considered the workplace, it must be remembered that under work health and safety laws, the employer is responsible for the safety of employees after a function to the extent that they can control it, so that letting intoxicated employees drive home after a work function would most likely breach their duty of care to their employees.


Redefining what is bullying ‘at work’

In another recent decision, the Fair Work Commission has confirmed a narrow definition of what constitutes bullying ‘at work’ when considering a claim under the anti-bullying provisions of the Fair Work Act 2009 (the Act).

The case

Three DP World Melbourne Limited (DP) employees applied to the Commission for an order to stop bullying against DP and the Maritime Union of Australia (MUA) alleging that they were the subject of repeated unreasonable behaviour by other employees at the company and MUA officials.

Under s 789FC of the Act the Commission can only make orders to stop ‘bullying’ when it is satisfied that the worker/s have been bullied ‘at work’.

The respondents, DP and MUA, applied to strike out a number of the applicants’ grounds for their application on the basis that they didn’t occur ‘at work’.

The applicants’ grounds included that:

  • offensive and insulting Facebook posts were made about the two applicants by MUA officials, members and DP World employees;
  • MUA failed to provide advice and representation to the applicants who were members of the Union;
  • DP and MUA employees and members made various threats against the applicants and warned others not to associate with them; and
  • some actions not at work may nevertheless provide relevant context and background to other alleged behaviour at work.

The findings

The Commission further refined how it determined whether the bullying behaviour occurred ‘at work’:

  • as a narrower concept than the previous interpretation of conduct that has a ‘substantial connection to work’;
  • covers circumstances in which the alleged bullying conduct occurs at a time when the worker is ‘performing work’, regardless of time of day or location;
  • is not limited to the confines of the physical workplace;
  • includes meal times and other breaks when the worker may not be performing actual work; and
  • extends to when the worker is participating in other activities authorised or permitted by the employer (i.e. accessing social media while performing work).

The Commission’s limitations on when actions occur in order to bring them within the anti-bullying jurisdiction, can be seen as confusing if not somewhat artificial. Situations where a bullying post on social media is made while the miscreant is not at work, would not give rise to a bullying claim unless the employee read the post while at work during the course of their work.

Also, while the worker doesn’t have to be ‘at work’ when any additional comments are posted, the worker making the claim to Commission will have to have accessed the post and the comments that constitute or further the bullying, while ‘at work’.

Good and bad news for employers

The Commission has acknowledged that the definition is not fully developed or perfectly operational in complex cases. It hopes that over time the definition and its application can develop on a case-by-case basis.

Even though it is confusing, any tightening of the application of anti-bullying orders and provisions by the Commission will be welcome news for employers, although generally most bullying cases taken to the Commission are either struck out or settled by mediation.

In reality however, bullying or harassment  between employees which occurs after hours, still has the capacity to affect the mental state (and productivity) of employees when they are in the workplace. To this end employers should strongly consider having a social media policy which establishes what is appropriate and inappropriate behaviour by employees in their after work lives which impacts on the workplace. The policy should also clearly outline that there will be disciplinary sanctions for inappropriate behaviour.


Significant changes to Queensland workers’ compensation scheme proposed

The Workers’ Compensation and Rehabilitation and Other Legislation Amendment Bill 2015 (Bill) has been introduced in Parliament and it proposes a number of changes to Queensland’s workers’ compensation scheme. The Bill, if passed, will amend the Workers’ Compensation & Rehabilitation Act 2003 (Qld) (the Act). According to the Explanatory Notes, the Bill seeks to implement a number of policy proposals made by the State Government as part of its pre-election policy campaign.

If the Bill is passed, the most immediate impact that the changes will have on employers’ day to day operations will be that employers won’t be able to obtain a copy of a prospective employee’s workers compensation claims history as a part of their recruitment process.

Self-insured employers in Queensland are likely to experience some financial implications, as the threshold for all injuries on or after the date of the State election (31 January 2015) will be removed, with additional compensation being available to particular workers impacted by the operation of the common law threshold prior to 31 January.

Further information will be available once there is definitive news on the progress of the Bill.


First anniversary of revised ASX Corporate Governance Principles and Recommendations

It’s now been (just) over a year since the 3rd edition of the ASX Corporate Governance Council’s Corporate Governance Principles and Recommendations (CGPRs) came into effect on 1 July 2014.

All ASX listed entities whose financial year ended on 30 June should be considering how they (many for the first time), will now report against these updated Recommendations for the 2015 financial year.

Some entities may have adopted the CGPRs prior to 1 July 2014 and have previously reported on their compliance with the CGPRs.

In either case, all entities are currently in the dark on the extent to which institutional investors, advisers and analysts will use information disclosed (or not) in accordance with the CGPRs to challenge or reward boards over their corporate governance commitments at reporting time.

Refresh on what has changed

As explained in our previous blog pre-empting the changes, the new ASX CGPRs were completely re-written and re-ordered from the 2nd Edition (2010) which has led to many obvious and not so obvious changes.

Key differences include:

  • greater flexibility with respect to how you publish your Corporate Governance Statement: either in an Annual Report or on a public website;
  • the requirement to lodge a new ‘Appendix 4G’, which is essentially a detailed checklist of each of the recommendations set out in the ASX CGPRs through which an entity must disclose whether they follow a recommendation and “if not why not”;
  • changes to director independence criteria;
  • disclosure of a board skills matrix; and
  • ensure you have a properly articulated risk framework that is working in practice.

Overall, a more comprehensive reporting standard is required from ASX entities.

CompliSpace 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.

A Greater Focus on Risk Management

An area that was greatly emphasised by the latest edition of the CGPRs was risk management and the need for boards to establish an entity’s ‘risk appetite’. This should be a core consideration in an entity’s risk management approach, the phrase basically meaning the amount and type of risk that an organisation is willing to take in order to meet their strategic objectives. The CGPRs extended the risk management obligations and disclosure requirements of listed entities.

Our previous blog includes information to familiarise yourself with what the industry expects regarding compliance with the CGPRs and relevant developments in risk management for your organisation.

It’s also worthwhile to consider how ‘culture risk’ features in your (current or future) risk register.  ASIC’s recent emphasis on culture coming from above, in the context of improving compliance, means that ASIC is sending a message to directors that they have a duty not only to ensure the viable functioning of a business, but also to ensure that a culture of regulatory compliance, risk management and proper corporate governance exists and is enforced in their organisation.

Gender diversity – if not now, when?

It’s impossible to ignore the media and shareholder focus on listed entities and their diversity policies.  The recent ‘name and shame’ article that featured in the Sydney Morning Herald, naming some of the ASX top 200 entities who have none, or very few, female board members should be the stuff of PR nightmares for any entity. That said, the article points out that many of the ‘shamed’ entities have more of ‘a private-company culture – one that pays less attention to modern-day corporate governance principles’ – which is in part due to the dominance of a majority shareholder over minorities who may have stronger diversity priorities.

Basically, their culture ‘led from above’, is an obstacle to gender diversity at senior levels.

Recommendation 1.5 of the new CGPRs sets out the requirements of an entity’s diversity policy, including that the board set ‘measureable objectives for achieving gender diversity’ and disclose its achievement of those objectives at the end of a reporting period.

ASX entities who may not have succeeded in implementing this recommendation in the 2015 financial year, or who have failed to set and/or achieve measurable objectives, should be wary of the shareholder and media scrutiny which may result.

Achieving gender diversity on boards is a global priority and a recent Credit Suisse report on women in senior management also shows that companies with more women in the boardroom bring better returns and outperform the stock market. The Credit Suisse report is based on its global survey of 28,000 senior managers at over 3,000 companies across 40 countries in all major sectors.  The report makes the point that as the globalisation of economies increases, so too will a cultural change which should make female representation at elite levels in organisations a priority, if not a requirement, of doing business between companies and countries.

Will the 2015/2016 financial year be the year of greater gender diversity for your organisation?

What should your organisation be doing?

For early adoptees of the new CGPRs, the reporting process should not be too much of a rude shock as you have already taken practical steps to implement the changes to the principles and recommendations.

Most of the work will come down to creating a corporate governance statement and having it approved by the board and completing and lodging an Appendix 4G.

For those entities who were late to adopt and implement the new CGPRs, now is the time to get up to speed on the principles and recommendations and understand what steps you should be taking to ensure your organisation’s governance strategy aligns with the CGPRs.

A recent article Raising the Bar by Tony Featherstone, which previously appeared in the May 2015 edition of Company Director magazine,  is a useful resource for all ASX entities to understand what steps they should take to ensure that their governance practices align with the new CGPRs – especially if you are one of those entities who may not have been an early adoptee of the changes.

In his article Mr Featherstone quotes governance expert Steven Cole FAICD, who says: “I suspect some boards will have gone to sleep on these recommendations because they didn’t have to introduce them for 12 months. There’s a lot more in the implementation of these recommendations than meets the eye. There’s also a lot more prescription around how to disclose governance information and the general expectation is that disclosure will need to be more meaningful than it has in the past.”

The ‘name and shame’ article clearly emphasises the importance of taking meaningful steps to implement the diversity recommendations of the CGPRs in an entity’s governance structure and culture.

Mr Featherstone’s article provides 13 board considerations for implementing the CGPRs, with a particular focus on how to address the new increased disclosure obligations in relation to board skills and structure.

How can CompliSpace help?

CompliSpace has been working with ASX-listed entities for over 10 years, assisting them to develop risk and internal control systems that allow them to meet their compliance obligations and most importantly to obtain real value from their investment in robust governance, risk and compliance infrastructure.

ASX publishes updated Guidance on Continuous Disclosure Effective 01/07/15

Earlier this year the Australian Securities Exchange (the ASX) released a consultation paper on proposed changes to Guidance Note 8 Continuous Disclosure: Listing Rules 3.1 – 3.1B (GN 8).  We wrote a blog that explained the changes proposed by that consultation paper.

Now, the ASX has released a final updated version of GN 8, which took effect on 1 July 2015.

Who should be reading the new GN 8?

The ASX has released a variety of documentation to help explain changes it has made to the final GN 8.

They include an updated version of the Continuous Disclosure: Abridged Guide.

Demonstrating just how tricky entities and their advisers find the application of the continuous disclosure obligations under the listing rules, GN 8 is now 84 pages long.  This length is in comparison to the more palatable 15 pages of the Abridged Guide.

As part of the consultation feedback to the proposed changes to GN 8, the Australian Institute of Company Directors (AICD) pointed out that the increasing volume of GN 8 ‘is of some concern as this may impact its usefulness as a guide.’  In response to the AICD’s concern, the ASX refers to the Abridged Guide and notes that:

  • the Abridged Guide is targeted primarily at directors and senior managers of listed entities; versus
  • GN 8 which is targeted primarily at company secretaries, investor relations professionals and legal advisors.

So, based on the ASX’s direction, directors and senior managers should be smiling at avoiding reading the tome that is GN 8…don’t worry we have read both documents.

What has changed?

Our previous article summarised the key changes in the updated GN 8.

The substance of those changes have not been modified by the final version and instead, the changes between the draft consultation version and the final version are mainly additional text to further explain the ASX’s approach to ‘Market sensitive earnings surprises’ at section 7.3 and ‘correcting analyst forecasts and consensus estimates’ in section 7.4.

The additions further explain:

  • the ASX’s guidance on applying the materiality test that formerly appeared under the Australian Accounting Standards to determine wheter or not to update published earnings guidance;
  • that its additional guidance on earnings surprises is not intended in ‘any way’ to discourage listed entities or their boards from issuing earnings guidance but is instead intended ‘to ensure that the market is kept properly informed if an entity’s actual or projected earnings differ materially from its guidance'; and
  • that if an entity’s analysis of analyst forecasts or consensus estimates leads it to conclude that furthter information needs to be disclosed, a market announcement should be made instead of ‘selectively divulging’ information to analysts.

A new section 7.6 ‘Publishing analyst forecasts or consensus estimates to analysts’ has been included in the final version.  This new section advises entities on how to avoid providing ‘de facto earnings guidance’ through providing analysts with information on their forecasts to increase the accuracy of the analysts’ reporting.

One noticeable omission between the final GN 8 and the consultation paper version is in section 7.7 ‘Analyst and investor briefings’.  Previously, the ASX required that any new presentation provided to an analyst or investor briefing should be published on the ASX Markets Announcement Platform.  In the final GN 8 the ASX recognises that an entity may give a series of analyst and investor briefings over a short period of time which contain materially the same information, aside from being tailored for the audience.  ASX does not require ‘second and subsequent’ presentations to also be published on the ASX Markets Announcement Platform, as they are not ‘new’ presentations, unless they contain new market sensitive information.

Other points to note

In addition to the material new content referred to above, the final GN 8 also includes various other amendments to assist an entity to meet and understand its continuous disclosure obligations.

For example:

  • content of announcement: if an announcement is to be made about the signing of a contract relating to a signficant acquisition, the announcement should include information about the parties to the contract;
  • concept of confidentiality: the sharing of management accounts and internal budgets and forecasts (information prepared for management purposes), with bankers, insurers or rating agencies on a confidential basis won’t usually require disclosure of that information to the market; and
  • new judicial guidance: Justice Perrem’s reasoning in the Federal Court decision Grant-Taylor v Babcock & Brown Limited (In Liquidation)  2015, in relation to the scope of the obligation to disclose information to the market under section 674(2) of the Corporations Act 2001 (Cth) in, is used in footnotes as guidance to clarify some key concepts such as the meaning of ‘commonly invest in securities’ regarding the test for determining whether information is market sensitive and requires disclosure, and ‘awareness’ of information.

All of these inclusions in the final GN 8 should provide assistance to any company secretary or legal adviser considering whether a new piece of information may be subject to the disclosure obligations under LR 3.1.

What does this mean for you?

ASIC’s recent announcement that Coal Fe Resources Ltd (now Aus Asia Minerals Ltd) has paid a $33,000 penalty after ASIC served an infringement notice for the company’s alleged failure to comply with continuous disclosure obligations is a reminder to all entities that ASIC is prepared to take action in the event that their continuous disclosure obligations are not met.

To avoid reputational damage and other penalties for non-compliance with Listing Rule 3.1, all entities should be reviewing their disclosure policies in light of the final GN 8.

Changes may be required, particularly if an entity has policies and procedures in place in relation to earnings guidance.

CompliSpace will update the disclosure policy for ASX-listed clients subscribing to the CompliSpace programs.

Happy New (Financial) Year! Don’t miss important wage and super changes in FY16

Increase in minimum wage

From the 1st July 2015, the Fair Work Commission (FWC) has increased the national minimum wage by 2.5%.  This change will result in an increase from $640.90 to $656.90 per week or $17.29 per hour.

The slightly lower increase from last financial year’s 3% increase, is due to several factors including the:

  • growth in unemployment rate from its recent low of 4.9 per cent in March 2011, to 6.1 per cent in April 2015; and
  • lower growth in consumer prices and aggregate wages growth over the past year.

This change will apply to employees who are in the national system (i.e. covered by the Fair Work Act 2009 (Cth) (Fair Work Act)) and not covered by an award or agreement.

Employees who are in the national system and covered by a modern award, will also have their minimum rate increased by 2.5%. This then involves a flow-on to the other rates in the award.

This change will not apply to employees who are covered by the State systems. They will have their minimum rate set by the relevant State tribunal, and you should be aware of any changes that might be coming as a result of these decisions.

As for the impact on your business, if an employee is paid above the award rate for their classification there is no requirement to increase their salary by 2.5%. To avoid being red-carded, we suggest all employers check the wages paid to staff at or near award level. The website of the Fair Work Ombudsman has a handy PayCheck Plus tool for this purpose.

Failure to comply with the new minimum wage from 1 July 2015 can have significant consequences for an employer, including:

  • claims for underpayment of wages to the Fair Work Ombudsman, the Federal Court or the Federal Circuit Court;
  • actions for breaches of the Fair Work Act, which can result in fines of up to $51,000 per breach ($54,000 once the new penalty rate comes into effect – see below); and
  • detection of breaches by a Fair Work Inspector conducting a random workplace compliance audit – leading to enforcement action.

Superannuation guarantee: no increase (9.5%)

There will be no increase in compulsory employer superannuation contributions this new financial year, or any financial year, until possibly 30 June 2021, or when the government changes.

This means that the compulsory contribution amount remains at the amount introduced last year, being 9.5%.

Superannuation is an area which most clearly reflects the strategies of the political party in government.  When it was in power, the Labor Government had intended 2015/6 to herald an increase to 10%, while the Coalition Government has deferred the 10% increase it originally intended for 2018, to 2021.

Assuming that the current government’s strategy applies for the foreseeable future, the eventual increase to a 12% superannuation rate just might occur in 2025.

Increase in high income threshold

The high income threshold for unfair dismissal claims under the Fair Work Act will increase from 1 July 2015 from $133,000 to $136,700.

The threshold affects 3 main entitlements:

  • employees who earn more than the high income threshold and who aren’t covered by a modern award or enterprise agreement, can’t make an unfair dismissal claim;
  • employees who are covered by a modern award and have agreed to a written guarantee of annual earnings that is more than the high income threshold, don’t get modern award entitlements. However, they can make an unfair dismissal claim; and
  • the maximum amount of compensation payable for unfair dismissal is capped at either half the high income threshold (ie $65,000), or 6 months of the dismissed employee’s wage – whichever is less.

Increase in penalty unit

The Senate has passed the Crimes Legislation Amendment (Penalty Unit) Bill 2015 (Bill) which has resulted in an increase to the value of a penalty unit.

The Bill amends the Crimes Act 1914 (Cth) to increase the value of the penalty unit for Commonwealth criminal offences from $170 to $180.

According to the Explanatory Memorandum:

  • this amendment is broadly consistent with inflation since the penalty unit amount was last adjusted in 2012; and
  • the increase will only apply to offences committed on or after the date that the amendment comes into force – it won’t affect current proceedings for Commonwealth offences.

The new penalty unit amount will come into effect on 31 July 2015 so beware of committing an offence after that date!

Anti-Bullying in the Fair Work Commission
Now that the anti-bullying jurisdiction has moved beyond its ‘infant’ status, employers should have a finer awareness of their obligations and duties under the Fair Work Act and how to avoid becoming a statistic at the FWC.

An analysis of the Quarterly Reports and case decisions produced by the FWC has revealed:

  • fewer claims than predicted: before the introduction of the anti-bullying provisions in January 2014, the FWC predicted it would receive about 3500 ‘stop-bullying’ applications per year; in 2014 it received around 700;
  • ‘unreasonable behaviour': from FWC judgments, the following conduct is understood to constitute unreasonable behaviour: aggressive and intimidatory conduct, belittling or humiliating comments, victimisation, spreading malicious rumours, practical jokes or initiation, exlcuding from work related events, unreasonable work expectations;
  • ‘reasonable management action': is the defence used by employers.  The FWC has refined this concept to mean that the employer’s action must be lawful and not ‘irrational’, to avoid being considered bullying. In reaching its decision, the FWC will consider the context in which the management action occurred.
  • othe key principles that have emerged from FWC judgments include:
    • conduct that occurred before 1 January 2014 (when the bullying legislation was introduced) may be relevant and can be considered by the FWC, but this is in the context of it being linked to other conduct occurring after that date;
    • the provisions no longer apply if the employee ceases working for the employer. An employee can still make an application during his/her term of notice of termination, but it would be unlikely to succeed because employment is about to end and the threat of future bullying is thus removed; and
    • confidentiality of proceedings cannot be guaranteed. The mere prospect of embarrassment or distress to a party from being identified will not be enough to justify an order of confidentiality.

Another key principle that has emerged from FWC decisions to date is an understanding of when conduct will be considered to be ‘at work’. In general there must be a ‘substantial connection’ to work, but the alleged bully does not have to be ‘at work’ at the relevant time.

See our previous blog on cases discussing what constitutes ‘the workplace’ in the modern working environment.

And, just a reminder, bullying at work under Section 789FD(1) of the Fair Work Act states that a worker is bullied at work when:

  • another individual or group of individuals repeatedly behaves unreasonably towards the worker; and
  • that behaviour creates a risk to health and safety.

Further guidance can be found in the FWC’s recently released ‘Anti-bullying benchbook‘.

Reflect WHS in your annual report

Safe Work Australia recently announced that the Civil Aviation Safety Authority (CASA) is the winner of the Work Health and Safety Reporting Award at this year’s Australasian Reporting Awards.

The Work Health and Safety Reporting Award recognises excellence in reporting on the management of and performance in work health and safety. Safe Work Australia Chief Executive Officer, Michelle Baxter is encouraging all businesses to include WHS reporting in their annual report.
It is not too late to include work health and safety as part of your 2014-15 annual report. For inspiration just have a look at the CASA 2013-2014 annual report or the annual report of one of the other finalists (eg BHP Billiton).

Penalties for poor corporate culture – will ASIC ‘nudge’ your organisation?

ASIC has recently announced an approach to surveillance reviews which will include an examination of organisational culture. In addition, it has asked a Senate committee to consider laws that would allow it to punish individuals and companies for poor organisational culture.

Poor culture is not industry-specific

Although ASIC’s recent speeches have been directed at, and have used examples of, the practices of the financial services industry, the issue of managing organisational culture risk is common to all organisations.

Our article ‘Why effective policy management is critical to organisational success’ provides guidance on developing a desirable corporate culture.

In many ways, culture comes from above. The nature of an organisation’s culture is set by its leadership team – the board and senior management – through management, the execution of strategies, and practices that set the tone for an organisation.

ASIC made this point last year when, in another speech, Mr Medcraft noted that directors should ensure that the compliance function strongly drives a culture of compliance.

The bottom line is that ASIC is sending a message to directors that they have a duty not only to ensure the viable functioning of a business, but also to ensure that a culture of regulatory compliance, risk management and proper corporate governance exists and is enforced in their organisation.

ASIC speeches

ASIC’s concern about poor organisational culture has been repeatedly emphasised in recent speeches given by its Chairman Greg Medcraft.

On 3 June 2015 Mr Medcraft presented to a Senate Estimates hearing, remarking that ‘it is a sad fact that bad culture leads to bad conduct and this inevitably leads to poor outcomes for consumers’. Given there is a strong connection between poor culture and poor conduct, ASIC thinks culture is a major risk to:

  • investor and consumer trust and confidence; and
  • the fair orderly and transparent operation of our markets.

Mr Medcraft announced that ASIC intends to incorporate culture into its risk-based surveillance reviews. For AFS Licensees, this could result in ASIC determining that a licence should be revoked because the culture of the Licensee breaches its obligation under section 912A of the Corporations Act 2001 (Cth) (the Corporations Act) to provide its services ‘efficiently, honestly and fairly’.

ASIC believes that breaches of the Corporations Act caused by cultural conduct should attract civil penalties and administrative sanctions.

It seems that ‘culture risk’ should now be added to an organisation’s risk register – if it wasn’t already there.

What can I do to improve culture?

In a speech delivered to the Annual Stockbrokers Conference on 25 May 2015, Mr Medcraft stated that the culture within a firm – its shared values and assumptions – has a positive influence on behaviour and good or bad culture can lead to good or bad market practices.

In the same speech he introduced the ‘3 C’s’ framework on culture risk for organisations.

The ‘3 Cs’ stand for:

  1. communication;
  2. challenge; and
  3. complacency.

Those 3 elements are important influencers of an organisation’s culture as follows:

1. Communication

Communication of conduct expectations needs to be clear, concise and effective. This includes communication that is proactive and regularly and consistently repeated across the organisation.

2. Challenge


  • should challenge existing practices to determine whether current conduct is appropriate;
  • need to foster an environment where employees are encouraged to escalate concerns without fear of retribution; and
  • should consider rewarding staff for speaking up.

3. Complacency:

Don’t be complacent. Conduct should be continually reviewed, enforced and validated.

Civil penalties for a bad corporate culture?

You may be surprised to know that ASIC is asking for a change in the law to allow it to prosecute companies for a poor corporate culture. In his opening statement, Mr Medcraft said that in addition to administrative action (revoking an AFS License), ‘we think that when an officer breaches a law ASIC administers – and culture is responsible – then the officers and the firm should be responsible’.

Mr Medcraft is referring to section 12.3 of the Criminal Code Act 1995 (Cth) (the Criminal Code), which defines ‘corporate culture’ as ‘an attitude, policy, rule, course of conduct or practice existing within the body corporate generally or in the part of the body corporate in which the relevant activities takes place’.

The Criminal Code also states that ‘this Code applies to bodies corporate in the same way as it applies to individuals. … A body corporate may be found guilty of any offence, including one punishable by imprisonment’.

The Criminal Code introduces the concept that criminal responsibility should attach to organisations where the corporate culture encourage situations which lead to the commission of offences. The provisions make organisations accountable for their general managerial responsibilities and policy.

ASIC is asking for the introduction of civil penalties relating to poor corporate culture to apply to the Corporations Act provisions that it administers. Civil penalties require a lower standard of proof than criminal offences (‘the balance of probabilities’ as opposed to ‘beyond reasonable doubt’).

ASIC has used the opportunity to give evidence before the Senate committee to ask for these changes in the law, stating that ‘the Financial System Inquiry recommended a broad review of penalties, and this would be an opportune time to consider these issues’.

How can your reflect the ‘three Cs’ in your organisation?

The answer lies in your organisation’s governance and risk frameworks and the policies, procedures and practices which form part of them.

According to Mr Medcraft, if ‘ASIC find that the policies, procedures and practices in an entity don’t influence good conduct, it raises a red flag with us. It tells us to look harder, as there are likely to be problems within that entity. And, we will look to apply the right nudge to change behaviour.’

To avoid ASIC ‘nudging’ your organisation, it might be timely to review your risk and compliance frameworks to ensure they are tailored towards the delivery of a robust culture that promotes trust and confidence in your organisation.

Lawyers and Real Estate Agents to feel the force of new AML/CTF regulations

The proposed second tranche of Australia’s AML/CTF regime is designed, amongst other things, to ensure that lawyers, real estate agents and jewellers are required to comply with the obligations under Australia’s Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (Cth) (the AML/CTF Act).

Whilst the failure to introduce this second tranche of reforms has been the elephant in the room for nearly 10 years, the recent media attention on large property transactions in Australia involving overseas investors has reignited this debate and applies considerable pressure on the Federal Government to act.

The $39 million sale of Villa Del Mare in Point Piper, Sydney, caused controversy when its forced re-sale was ordered by the Federal Treasurer once it was discovered that the purchase by a Chinese national had allegedly breached the Government’s foreign ownership rules under the Foreign Acquisition and Takeovers Act 1975 (Cth) (the FAT Act). Under the FAT Act, a ‘foreign person’ must seek Government approval before acquiring an interest in certain types of residential real estate.

On 9 June the Federal Treasurer announced that the Foreign Investment Review Board has 195 cases of potential breaches of the FAT Act under investigation – adding further ammunition to the argument for the scope of AML/CTF Act to be extended to ensure that all aspects of real estate transactions involving overseas investors are adequately regulated.

Second tranche of regulation

In an attempt to tighten the investment rules, the Government has proposed various initiatives, including penalising third parties such as real estate agents, lawyers and accountants, who assist individuals or corporations to purchase property in contravention of the FAT Act.

Real estate agents are vulnerable to the risk of money laundering and terrorism financing through illicit investments in property. The investments can be made through a chain of transactions in real estate to disguise the source of funds. Various other methods of concealing and integrating large funds into the legitimate economy through real estate are outlined in AUSTRAC’s ‘Strategic analysis brief: Money laundering through real estate‘.

Lawyers are vulnerable because their services can be used to conduct transactions of behalf of foreign investors, establish trusts and other structures to hide identity, recover fictitious debts and make payments through trust accounts.

It’s not ‘new’ news that these industries are being targeted by the Government for AML/CTF regulation. The AML/CTF Act was always intended to be implemented in two tranches. The first tranche, relating to ‘designated services’ in the financial and gambling sectors and bullion dealers, was implemented by 2008. The second tranche is the extension of the AML/CTF obligations to real estate agents, jewellers and professionals such as accountants and lawyers. The impact of the global financial crisis meant that the second tranche was delayed.

Now, as Australia’s property industry is apparently in a bubble, there is increased focus on the foreign beneficiaries of property transactions in Australia and renewed calls for the AML/CTF Act to be amended.

The recently released FATF Mutual Evaluation Report on Australia’s AML/CTF Regime which criticised Australia’s failure to introduce the second tranche has also provided further impetus for change.

What will AML/CTF Act amendments look like?

Although draft legislation is yet to be released by the Government, it’s anticipated that the second tranche of AML/CTF regulation will be similar to the current compliance obligations imposed under the AML/CTF Act and also the Anti-Money Laundering and Counter-Terrorism Financing Rules (AML/CTF Rules).

Under the new regime real estate agents and other new ‘reporting entities’ will be required to:

  • implement a risk-based AML/CTF program;
  • carry out a risk assessment of customers, designated services, methods of delivery for designated services and the foreign jurisdictions; 
  • understand the nature and purpose of the business relationship with our customers and the control structures of non-individual customers; and
  • carrying out minimum customer identification and verification procedures. 

If the new laws are introduced, members of the new industries who will become reporting entities under the AML/CTF Act will see their compliance obligations increase.  Their existing compliance programs should also be reviewed.

Hopefully by the date of their introduction, Standards Australia will have confirmed whether or not the new compliance standard ISO 19600:2014 Compliance Management – Guidelines will be adopted as an AS/NZS standard.

How can CompliSpace help?

CompliSpace provides a range of ongoing training services including high impact workshops designed for financial services executives and Responsible Managers. These practical group sessions are designed to keep attendees up-to-date with the latest industry changes, real life case studies and fast-track the practical development of new knowledge and skills.

Further details of our next sessions can be found here: http://www.complispace.com.au/afsl-executive-workshop

CPD certificates and training material will be provided post workshop.

3 June 2015: Workplace Relations Update for Executives On-the-Go

Bank manager dismissed for romantic conflict of interest

A branch manager at Westpac was dismissed after he failed to disclose a relationship with an employee that created a conflict of interest. He applied to the Fair Work Commission for relief under unfair dismissal provisions, but was unsuccessful. It must be noted that the basis  for his dismissal was not  having a relationship with an employee per se, but that he failed to disclose a relationship with an employee who was initially his direct report, and the consequences which flowed from that failure.

Mr Mihalopoulos was a long-time employee of the Bank, being promoted through the ranks until he become the bank manager of a regional branch in 2012. In February 2014, he became involved in a romantic relationship with one of the employees at his branch, Ms A. Ms A reported directly to Mr Mihalopoulos.  Both parties were married at the time the affair began. Mr Mihalopoulos and Ms A moved in together in March 2014.

This relationship was kept from Mr Mihalopoulos’s employees, and from his supervisors. When asked by his manager on a number of occasions if he was in a relationship with Ms A, Mr Mihalopoulos  denied the relationship.

Under the terms of Mr M’s contract of employment, he was required to disclose to his employer any likely conflict of interest. He also received online training on Westpac’s conflict of interest policy, which included training in what constituted an actual, potential and apparent conflict. The last situation being one where a third party might reasonably perceive that there was a conflict. Mr Mihalopoulos’s contract of employment also included provision for dismissal for dishonesty.

Mr Mihalopoulos was responsible for conducting performance appraisals on Ms A, and sought to influence salary and promotion decisions (a normal part of his role) to Ms A’s benefit.

This relationship eventually turned sour, with an Apprehended Violence Order (AVO) made against Mr Mihalopoulos. He was later charged and found guilty of breaching that order after contacting Ms A, as well as for malicious damage. For these offences, he was given a bond, with no conviction being recorded.

Following the court action, Mr Mihalopoulos’s supervisor met with him and provided him with a letter outlining the allegations against him, including that he:

  • was dishonest about the relationship with Ms A;
  • exposed the Bank to reputational damage by breaching the AVO; and
  • failed to appreciate the conflict of interest.

After following appropriate procedures, when Mr Mihalopoulos’s was eventually dismissed, Mr M applied to the Commission for reinstatement, arguing that dismissal was disproportionate to his actions.

The Commission was quite clear in finding that, contrary to his contract of employment,  Mr M was in a potential conflict of interest situation which he dishonestly failed to disclose to his employer. It said that:

to be blunt it should be obvious to any reasonably intelligent person that for a manager in an organisation such as [the Bank] to form a romantic relationship with a direct subordinate creates the potential for a conflict of interest’. It went on to find that Mr Mihalopoulos’s failure to disclose his relationship with Ms A ‘constitutes a valid reason for [his] dismissal‘,

and dismissed his application.

It should be noted that Ms A was considered on objective grounds to be one of the top performing employees in her branch, however this did not negate the perception of bias arising from the conflict of interest.

This case illustrates a number of the issues which make relationships between direct reports and co-workers an area that gives rise to sleepless nights for employers – apart from the obvious dangers of conflict of interest or perceived conflict of interest, both of which can lead to poor decisions, poor staff morale and lowered productivity while the rumours flow.  And there is always the risk of relationships going sour, and as in this case, matters escalating to court cases which result in reputational damage to the employer.

Office romances are not rare, so an employer should give some thought to how such situations should be managed. In this case, the Westpac supervisor indicated that had the relationship been disclosed, arrangements could have been made to move one of the parties to another branch. The issue becomes far more complex in smaller organisations. It is clear however, that a policy prohibiting fraternisation between co-workers certainly does not stop what appears to be nature taking its course.

Breach of a ‘golden rule’ of safety not enough to avoid unfair dismissal

A worker has been been awarded compensation after the Commission found that he was unfairly dismissed, despite finding that he broke a ‘golden rule’ of safety. Once again, the importance of following due and proper process in a dismissal has been affirmed.

The worker, Mr Auberson, was a rigger engaged on a project being run by Clough Downer Joint Venture Construction Pty Ltd (CDJVC). His duties were to work in a crew with a crane operator, a pipe fitter and another rigger.

The company had a set of ‘Safety Golden Rules’ that were displayed at various locations on site, read out and discussed each day. The relevant ‘Golden Rule’ is succinctly stated as ‘NEVER work at height without fall protection’. The Golden Rules stipulated that breaches would be investigated and may result in disciplinary action and dismissal.

On the day in question, a safety assessment was prepared requiring a harness to be worn when working at a height above 1.8 metres, and where no other fall protection (such as a handrail) existed. On commencing a job involving moving a pipe by crane, Mr Auberson checked the safety assessment and assessed that the job was ‘under the workable height’. He proceeded to stand with one foot on a pipe rack, and one foot on a beam, holding a line attached to the pipe being moved into position. He was also directing the crane driver using a hand signal or radio. He claimed that he was controlling the risk of a fall by:

  • having three points of contact; and
  • being under the workable height.

A manager then became concerned about his work, and called him off the job he was working on. There were then claims that he was standing on the pipes in contravention of accepted practice. After being called off, there was a discussion between work supervisors. He then climbed back onto the pipe rack, but denied that he was told not to do so. Mr Auberson then completed landing the pipe.

Work was stopped and a discussion about the work practice with work supervisors ensued. New safety assessments were prepared.

Four days later, Mr Auberson was stood down on full pay, and given a letter alleging safety breaches relating to the working at heights Golden Rule. A meeting was held a couple of hours later, where Mr Auberson was expected to respond to the allegations detailed in the letter. His explanations were not accepted and his employment was terminated the next day.

The Commission, when examining these events, found that Mr Auberson did breach the Golden Rule about working at height, and this was a valid reason for his dismissal. Addressing the allegation that Mr Auberson disobeyed a direction about the work practice, the Commission found that the direction alleged to have been given to him – that he not continue with the job – was not in fact given in those terms.

However, in following the process at the workplace, the Commission found that Mr Auberson was not given an opportunity to respond to the reasons for his dismissal. The letter was provided to him only 90 minutes before a meeting to discuss those allegations.  This was found to be an insufficient period for him to properly prepare his response to the allegations. While he was afforded the opportunity of a support person, he had no opportunity to meet with that person prior to the meeting. His dismissal was found to be unjust and unreasonable.

This case illustrates what should now be a familiar adage in workplace relations. A dismissal for the right reasons, but in the wrong way, will lead to a finding of unfair dismissal. Not even a breach of a ‘Golden Rule’ is exempt from this.

Mr Auberson was then awarded compensation, calculated at 12 weeks’ pay, minus  40% for his own contribution towards the situation that lead to his dismissal. The total was $8,831.78.


The right to have legal representation at the Fair Work Commission depends on the facts

Recent decisions by the Commission serve to remind employers that there is no automatic right for them to be represented by lawyers in matters before the Fair Work Commission. The objective is for employees and employers to have roughly equal footing to achieve a fair outcome. This would not be served where an employer may have access to significantly greater legal firepower, but it does take into account that employees represented by large unions are likely to have access to very experienced advocates.

Under section 596 of the Fair Work Act 2009 (Cth) (the Act) an employer can only be represented in the Commission by a lawyer with permission.

That permission may only be granted if:

(a) it would enable the matter to be dealt with more efficiently, taking into account the complexity of the matter; or

(b) it would be unfair not to allow the employer to be represented because they are unable to represent themselves effectively; or

(c) it would be unfair not to allow the employer to be represented taking into account fairness between the employer and other persons in the same matter.

The Act provides examples of circumstances in which the Commission might grant permission, including where a person is from a non-English background or has difficulty reading or writing, or where a small business is a party to a matter and has no specialist human resources staff while the other party is represented by an industrial association or another person with experience in workplace relations advocacy.

Clearly, this right is not intended to benefit large, ASX-listed employers with large and experienced human resources teams – unless the matter is ‘complex’.

This was the situation that Asciano Services Pty Ltd found itself in recently when it sought permission to be represented by lawyers in unfair dismissal proceedings.

Asciano’s application had been challenged by its former employee’s representative, the Rail, Tram, and Bus Industry Union.

The Union submitted that Asciano should not have legal representation because:

  • it could represent itself using its own qualified personnel;
  • the matter was not complex;
  • Asciano is a large organisation with significant resources and a sophisticated human resources department; and
  • the basis of section 596 of the Act was ‘to put everyone on an equal footing.’

Ultimately, these factors persuaded the Commission that Asciano should be refused permission to have legal representation.

What does this mean for employers? The Commission’s decision provides some useful indicators of when an application for legal representation may or may not be granted.

Factors in favour of allowing representation

  • a complex matter of law to be determined;
  • no internal legal team;
  • no internal human resources team;
  • no specialist personnel;
  • the non-availability of internal legal, human resources or other specialist personnel (if any) to attend a hearing; and
  • unfairness.

Factors against allowing representation

  • internal legal team;
  • internal human resources team; and
  • other specialist personnel.

The Commission will be looking  at the facts of each case in making a determination. In another recent decision involving Greyhound Australia Pty Ltd (Greyhound), the Commission allowed Greyhound to have legal representation because even though it had human resources staff, their lack of advocacy experience compared to the union representing the other party would have meant that ‘an inequality or disparity would exist.’


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