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Employment Update – May 2018 – Recent employment law decisions provide timely guidance for employers

This month we look at two recent decisions in the employment law space.  The first decision relates to an employer’s decision to terminate an employee for breaching a cardinal safety rule.  The second decision relates to the reprehensible conduct of an employer who failed to pass on an employee’s paid parental leave entitlement.

Use of mobile phone whilst operating a vehicle upheld as a valid reason for dismissal

Recently, a tram operator was found by the Fair Work Commission to have been fairly dismissed after using a mobile phone whilst operating a tram.

On the night in question, the employee of Yarra Trams, was driving a tram on a designated route.  She stopped the tram at a set of traffic lights. While the lights were red, and the tram was stationary, the employee took her mobile phone from her shirt pocket and checked her messages for some 15 to 20 seconds. A cyclist saw the employee using her mobile phone and made a complaint to Yarra Trams.

The next day when the employee reported for her shift, she was notified of the complaint and admitted to the phone use.  She was apologetic and explained that she thought she had mitigating circumstances for the conduct in that her father and father-in-law were sick and she was concerned for them.  She received a letter suspending her employment pending an investigation.

The investigation proceeded and a report was prepared.  The outcome of the report was that the employee had breached a number of Yarra Tram’s rules, including a cardinal safety rule, being the prohibited use of a mobile phone while operating a tram.  Consequently, the employee was terminated immediately and was paid in lieu of her notice of termination.

The employee made an unfair dismissal claim.

In his decision, Deputy President Colman found there was a valid reason for the termination.  With respect to the breach of the cardinal safety rule in particular, the Deputy President stated:

“[The breach of the cardinal safety rule] constituted a valid reason for termination in its own right. The rule enshrined a fundamental safety principle. [The employee] was aware of her obligation to observe the rule.  Her contravention of this rule is a serious matter.”

The Deputy President was satisfied with the process followed by Yarra Trams in effecting the termination and that there were not mitigating circumstances sufficient to find the dismissal unfair.  The Application was dismissed.

Lessons for employers

The key lesson arising out of this decision is that a breach of a cardinal safety rule can constitute a valid reason for dismissal.  The codifying of safety rules in a policy, and then training on that policy, are essential steps for an employer to take to be able to establish a valid reason for dismissal.

Failure to pass on parental leave payments to employee results in huge fines for employer

A service station operator and its director have been slapped with huge fines after failing to transfer paid parental leave pay distributed out by the Department of Human Services (‘DHS’) to the entitled employee.

In this case, the employee worked as a chef in a roadhouse and another restaurant owned by the employer.  The employee became pregnant and left on parental leave in August 2014.  The employee made a claim for paid parental leave through the DHS in November 2014 and provided proof of the date of birth in late December.  In January 2015, the employee requested an extension of her parental leave period for health reasons.

In April 2015, the DHS issued a compliance notice to the employer for failing to register as the employee’s employer and provided it with a compliance date.  Due to the employer’s delay in registering, the DHS did not make a determination regarding the employee’s parental leave pay application until later April 2015.  The DHS then transferred $11,538.90 to the employer’s bank account with nominated payment date of 5 days later.  The employer had nominated the payment date.

In mid-June, the employee notified the DHS that no payment had been received.  After failed attempts to make contact with the employer to confirm whether the payment had been made, the DHS referred the matter to the Fair Work Ombudsman (‘FWO’), who commenced an investigation in August 2015.

As part of that investigation, the employee confirmed that she had still not been paid.  The following day, the employer advised the FWO that the payment had been made and agreed to providing documentary evidence of that payment.  About 2 weeks later, and following requests from the FWO Inspector, the employer provided a document which purported to be a payment authority signed by the Applicant.

About 2 weeks later, the FWO requested further records that the payment had been made.  The Director then requested additional time to provide the records and said that he would make the payment ‘again’ if necessary to resolve the matter.  The Director then produced a further alleged payment record asserting that the employee had been paid in May 2015.

The FWO then conducted interviews with the employee and the Director.  The employee gave evidence that she had attended the roadhouse and requested to be paid, that no payment had been received, and that no payment authority was ever signed by her.

In the Director’s interview he stated:

“(a) he had some records of the hours [the employee] worked;

(b) he did not pay Ms [the employee] when she took carer’s leave and she would instead work longer hours at a subsequent time;

(c) he did not use payslips often as he would have to pay his accountant to create them and he gave payslips to people who needed them;

(d) he had delayed registering the [employer] as [the employee’s] employer with Centrelink for the purposes of paid parental leave;

(e) he received the parental leave pay from Centrelink on 30 April 2015;

(f) he was unable to make a bank transfer of the entire amount of the payment from the [employer’s] account to [the employee’s] bank account, as he had a $2,000 transfer limit;

(g) he paid the parental leave pay to [the employee] in cash on 4 May 2015;

(h) [the employee’s husband]attended the Roadhouse on 4 May 2015 to collect the cash. He was accompanied by another person, who sat outside in the car;

(i) he received the Alleged Payment Authority from [the employee] to authorise payment of the parental leave pay to [the employee’s husband ]payment (sic) by fax on 4 May 2015, although he did not look at the fax before paying the cash to [the employee’s husband] and was unable to provide any fax record confirming receipt;

(j) [the employee and her husband] made numerous requests to him for the money after 4 May 2015; and

(k) ‘I’m ready to pay this again … if you guys think I did something wrong I’m ready to pay her again’.”

About a week later, the employer paid the employee the relevant parental leave pay amount and confirmed this with the FWO.

The FWO then proceeded with further investigations of the employer, including providing notices to produce documents relevant to the employee and her employee records.  It appears that the employer claimed to have lost a number of the documents and did not comply with a number of the FWO’s demands.

Ultimately, the FWO commenced proceedings against the employer and the Director on the basis that there had been contraventions of the Paid Parental Leave Act (failing to pay the parental leave payment on time) and also the Fair Work Act 2009, regarding the failure to comply with the notices to produce and also failing to keep appropriate employee records.  There were also contraventions in relation to knowingly making use of a false and misleading record, being the alleged payment record provided to the FWO initially.

The contraventions alleged by the FWO against the employer were admitted by the Director, and the Director co-operated with an Agreed Statement of Facts.

Judge Nicholls gave detailed reasons for his position on penalties in this matter.  For the breaches of the Paid Parental Leave Act and the Fair Work Act, the employer was fined a total of $98,700.00 and the Director was personally fined a total of $19,740.00.

Judge Nicholls was particularly critical of the Director offering up as an excuse his bank limit of $2,000, and this did not sit well with the Director’s plea for a discount on penalty.  Judge Nicholls stated:

“It must be said that the “excuse” proffered by [the Director] now, that he delayed payment to [the employee] because he did not know how to achieve such payment (over a period of six months) because of bank transfer limits, stretches to incredulity.

Further, this “excuse” is inconsistent with the submission also made that [the Director] is “contrite for what he has done” … True contrition, in my view, cannot include reliance on excuses which, it must be said, are absurd.

What adds to this state of affairs is that the [employer’s] bank account (operated by [the Director]), had credited to it, by the DHS, the amount to be paid to [the employee] on 30 April 2015. That is, [the Director] had the money to pay [the employee] as at 30 April 2015, and this was considerably earlier than when the payment was actually made to her.

All of the circumstances, including when regard is had to the nature and extent of the loss suffered by [the employee], argue for a penalty payment at the maximum end of the range, not at the “discount[ed]” amount now urged by the respondents.”

Lessons for employers

Clearly this is an extreme case of an employer attempting to defraud an employee of an entitlement to paid parental leave.

The case does serve as a reminder that civil penalties can be applied to breaches of the Paid Parental Leave Act (which we do not see very often).

The penalties imposed in relation to the breaches of the Fair Work Act were a significant proportion of the total penalties imposed by Judge Nicholls.  It is then extremely important for employers to know their obligations in terms of keeping employee records, and that those records be kept accurately with respect to each employee.  Failing to produce and keep proper employee records, or worse, producing false records, may see an employer (and its directors) face significant financial penalty.

It is also worthwhile noting that whilst the FWO were initially involved by the DHS to investigate the paid parental leave issue, they have the power to, and did, broaden the investigation considerably.  The result was that the FWO established a number of additional non-compliances by the employer, which in turn resulted in significantly higher penalties being awarded against the employer.

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