Monthly Update—Australian Labour & Employment

MESSAGE FROM THE EDITOR

In this edition of the Update, we examine the scope of the proposed Banking Executive Accountability Regime. We then discuss the unprecedented penalties imposed on the Construction, Forestry, Mining and Energy Union by the Federal Court of Australia in relation to the unlawful industrial action at the Barangaroo site in Millers Point in July 2014. Finally, we examine the Supreme Court of Queensland's decision to award an employee approximately $1.5 million in damages in relation to her employer's failure to prevent repeated instances of "managerial mistreatment".

IN THE PIPELINE—HIGHLIGHTING CHANGES OF INTEREST TO EMPLOYERS IN AUSTRALIA

Government Proposes Banking Executive Accountability Regime

On 22 September 2017, the Federal Government released a draft exposure bill (the Treasury Laws Amendment (Banking Executive Accountability and Related Measures) Bill 2017) for the introduction of a Banking Executive Accountability Regime ("BEAR"). The proposed BEAR will give the Australian Prudential Regulation Authority ("APRA") extensive powers in relation to "accountable persons" (including directors and persons in senior executive roles) of authorised deposit-taking institutions ("ADIs").

As currently drafted, the proposed BEAR will require ADIs to have a remuneration policy which requires that if an accountable person has failed or is likely to have failed to comply with his or her "accountability obligations", then the person's "variable remuneration" (meaning remuneration conditional on the achievement of objectives or a retention bonus) is to be deferred or reduced by an amount that is proportionate to the failure or likely failure. A person's "accountability obligations" include conducting the responsibilities of his or her position with honesty and integrity, and with due skill, care and diligence, and dealing with APRA in an open, constructive and cooperative way.

The proposed BEAR will also grant APRA the power to disqualify an accountable person for a period considered appropriate if APRA is satisfied that the person has not complied with his or her accountability obligations and the disqualification is justified. There is currently no requirement for APRA to provide reasons for its decision to disqualify an accountable person and no avenue for a disqualified person to make a merits-based appeal.

It is likely that the form and content of the BEAR will change as a result of stakeholder submissions and debate in Federal Parliament. We will provide an update in relation to the BEAR in due course.

HOT OFF THE BENCH—DECISIONS OF INTEREST FROM THE AUSTRALIAN COURTS

Court Imposes Unprecedented Penalties Totalling $2.4 Million on Trade Union

Australian Building and Construction Commissioner v Parker (No 2) [2017] FCA 1082

Factual Background. In July 2014, more than 1,000 workers engaged in industrial action at the Barangaroo site in Millers Point, Sydney. In April 2016, the Australian Building and Construction Commission commenced proceedings in relation to the industrial action against the Construction, Forestry, Mining and Energy Union ("CFMEU") and nine CFMEU officials, delegates and members: Australian Building and Construction Commission v Parker [2017] FCA 564. In that case, the Court found that the CFMEU had contravened the Fair Work Act 2009 (Cth) by, among other things, organising or engaging in industrial action before the nominal expiry date of an enterprise agreement ("EA"), and organising or taking an action with intent to coerce another person to engage in industrial activity. The Federal Court of Australia also considered the penalties to be imposed upon the CFMEU in light of this finding.

Legal Background. Under the Act, "industrial action" includes a ban, limitation or restriction on the performance of work by an employee, and a failure or refusal by an employee to attend for work or to perform work at all. Industrial action will be lawful only if the nominal expiry date of an applicable EA has passed.

If an employee organisation (such as a trade union) or an officer of an employee organisation organises or engages in industrial action before the nominal expiry date, the Court may impose monetary penalties upon that organisation and/or officer. Putting a price on contravention serves to punish and prevent the defendant (in this case, the CFMEU) and others from breaching the law in the future. In deciding whether to impose a monetary penalty, Australian courts consider a number of factors such as the circumstances in which the unlawful conduct took place, the nature and extent of any loss or damage sustained as a result of the unlawful conduct, and whether there has been similar, previous unlawful conduct by the defendant.

Decision. Judge Flick ordered the CFMEU and the seven individual respondents to pay unprecedented penalties totalling more than $2.4 million. In deciding to impose the maximum penalty of $1.33 million on the CFMEU's national branch, the judge examined its history of exhibiting a contempt for compliance with the law and the failure of prior impositions of penalties, some nearing the maximum, in deterring the CFMEU from engaging in unlawful industrial action. The judge said:

It is, with respect, not possible to envisage worse union behaviour. The prior imposition of penalties—some nearing the maximum—against the CFMEU has not deterred it from engaging in clearly unlawful industrial action…. The CFMEU's conduct exposes a cavalier disregard for the prior penalties imposed by this Court and exposes the fact that such prior impositions of penalties have failed to act as a deterrent against further unlawful industrial action.

Judge Flick also imposed penalties on the CFMEU's national branch in the amount of almost $1 million. In addition, penalties of up to $45,000 were imposed on the individual respondents. These penalties reflected the prominent roles the individuals played during the course of the unlawful industrial action and their willingness to place themselves outside the law and the constraints imposed by the Act.

In addition, the CFMEU was ordered to publish notices in two Sydney newspapers and a journal published by the CFMEU in relation to the contraventions and penalties imposed upon the organisation. The judge noted that the purpose of publication was to educate the CFMEU, the public and more generally those in the building industry that contravention of the Act may attract monetary penalties.

Lessons for Employers. The unprecedented penalties imposed in this case demonstrate the Court's determination to protect employers from the harms caused by unlawful industrial action and to enforce the provisions of the Act.

Employer Liable for Employee's Conduct Amounting to "Managerial Mistreatment"

Robinson v State of Queensland [2017] QSC 165

Factual Background. The plaintiff was the District Director of Nursing for the Cape York Health Service ("Service"). She alleged that from March 2010 to January 2011, she was subjected to harassment and managerial mistreatment by the Service's District Chief Executive Officer. This caused the plaintiff to develop a psychiatric injury and to enter compulsory retirement as a result of her injury. The plaintiff alleged that the defendant owed her a duty of care, and that the defendant was directly and vicariously liable for the acts and omissions of the District CEO.

Legal Background. An employer owes a non-delegable duty to all of its employees to ensure that it takes reasonable care of its employees' health and safety. This includes a duty of care to avoid reasonably foreseeable injury (including psychiatric injury). In determining whether an employer has breached its duty to take reasonable care, Australian courts will focus upon the nature and extent of the work being done by the particular employee and the signs given by the employee (such as an employee's work performance or changed emotional state).

An employer who is a corporate entity will be directly and vicariously liable for the wrongful conduct of an employee if the employer knew or ought reasonably to have known of the wrongful conduct, and such conduct was carried out in the course of the employee's employment.

Decision. The Supreme Court of Queensland held that the defendant had breached its duty of care to the plaintiff in two respects. First, the defendant had failed to take timely and determinative action in relation to frivolous and vexatious complaints made by another employee against the plaintiff. Those complaints had been handled by the District CEO. Second, the defendant had failed to prevent the District CEO's "course of managerial mistreatment" which included repeated blaming, humiliation, belittling, isolation and undermining of the plaintiff. Judge Henry described the "probability of potentially serious psychiatric injury from such behaviour" as being "sufficiently well known that a reasonable employer would take precautions against such conduct occurring."

Judge Henry held that the defendant was vicariously liable for the conduct of the District CEO. It was "uncontroversial" that the defendant should be inferred to have knowledge of the District CEO's conduct because the managerial mistreatment of the plaintiff occurred in the course of her employment with the defendant and while carrying out her role as District CEO. The judge concluded that the defendant should have intervened to prevent the continuation of the District CEO's conduct.

The Court ordered the defendant to pay approximately $1.5 million in damages to the plaintiff. This is one of the largest payments for damages ordered by an Australian court in relation to a workplace bullying and harassment claim.

Lessons for Employers. In this case, the Supreme Court concluded that the accumulation of repeated instances of managerial mistreatment breached the defendant's duty to take reasonable care. However, the Court warned that isolated instances of managerial mistreatment may potentially breach an employer's duty of care.

In addition, the Court commented that in cases of repeated instances of managerial mistreatment, it may be appropriate to consider the managerial or executive employee's position of power in the workplace relative to the psychiatrically injured employee. The Court stated that the "intrinsic power differential" between the managerial or executive employee and the injured employee "is of itself an element tending to increase the probability and thus foreseeability of psychiatric injury". Australian employers should be mindful of the conduct of managerial or executive employees—the Supreme Court of Queensland's decision in this case is a reminder that such conduct may be attributed to the employer.

We thank associate Katharine Booth and paralegal Beverly Parungao for their assistance in the preparation of this Update.

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