Tristar – Workplace Ombudsman prosecution.

McArdle Legal has been closely following the predicament of the Tristar Steering and Suspension Australia Limited (‘Tristar’) employees in both our 8th and 10th edition newsletters.
Tristar is a car parts manufacturing company which had a manufacturing facility in inner City Sydney (Marrickville). In 2007, it lost the last of its contracts to supply steering gear to a major car manufacturer.

In June of 2007, a number of employees had been denied their redundancy entitlements because Tristar was ordering them to turn up to work when there was no work for them to do. Essentially, the company maintained the longest-serving employees on the payroll, despite the fact it had little work for them to do. They maintained that they were actively seeking business to continue the facility.

The reason for this was because it was cheaper to keep the employees at work, rather than pay out their generous redundancy entitlements. The severance provisions in the redundancy clause of the company’s 2003-2006 enterprise agreement, Clause 21.5, provided four weeks pay for every year the employee had worked for Tristar. This group of approximately 31 employees had an average length of service of 30 years, and the longest serving of the group had worked at Tristar for 44 years. This person would be entitled to 176 weeks severance pay plus five
weeks notice.

The workers were entitled all together to $3.6 million (AUD) in uncapped severance benefits under their agreement, whereas Tristar opted to keep them in employment for 12 months, spending only $1.9 million (AUD). Hence it was cheaper to keep the workers employed on the basis that the manufacturing facility needed to remain operating.

The Australian Manufacturers Workers Union (AMWU) and the Australian Workers Union (AWU) also maintained that it was cheaper to keep the workers in employment rather then paying them their redundancy benefits. On 31 August 2007, 13 employees won a settlement with Tristar to receive their entitlements under their employment agreement.

On 4 September 2007, Tristar agreed to a further 11 employees being paid their entitlements. This will leave only 7 employees on the payroll. These employees were allegedly entitled to the same redundancy package due to an exchange of letters.

On Thursday 15 November 2007, after 18 months, the primary dispute over the redundancy payments was resolved. Tristar agreed to pay the final 3 employees from the Marrickville plant their redundancy entitlements. The last of 31 manufacturing employees left Tristar on November 30 2007.

In spite of these arrangements, the Workplace Ombudsman continued to prosecute Tristar in the Federal Court of Australia (Federal Court), for breaching workplace laws and deliberately attempting to avoid paying termination entitlements to the workers by keeping them idle at work in the hope that they would resign. They faced a maximum fine of $33 000 per breach.

On 13 August 2008, the Federal Court dismissed the Workplace Ombudsman’s attempt to prosecute Tristar.

The Workplace Ombudsman argued that Tristar breached the Freedom of Association provisions of the Workplace Relations Act 1996 (Cth), by discriminating against or victimising the workers when it refused to make them redundant. In their view, any forced redundancies would have triggered the severance provisions in the aforementioned redundancy clause of the company’s 2003-2006 enterprise agreement. Because they were covered by an Agreement,
they were discriminated against.

However, Gyles J, believed that the Workplace Ombudsman was arguing that Tristar owed a duty to agreement covered employees to dismiss them when “major manufacturing ceased.” His Honour then noted that manufacturing and re-manufacturing work continued beyond that time and Tristar had made genuine efforts to obtain new business to keep the workers occupied.

Hence, in spite of the fact that the workers had been “seriously underemployed,” it was entitled to retain employees to carryout that actual and potential work. In the Courts view, once the employer has that choice, then no individual employee could claim that there was any
obligation upon Tristar to dismiss that employee in order to trigger the generous severance provisions. To do so, would be tantamount to reading the provision as a conditional contractual benefit for an affected employee, such as long service leave or superannuation.

Finally, Gyles J stated that section 792, taken in context, could have no sensible operation unless it involves discrimination against, or victimisation of, an employee on some basis connected with union membership, no matter how broadly. That could not be shown here.
Consequently, the Federal Court ruled that Tristar did not have a “duty” to dismiss the workers. They found that Tristar did not breach the Workplace Relations Act 1996 (Cth) and acted lawfully when it failed to make redundant, the remaining employees.

Interestingly, he criticised unions for using the workers as “foot soldiers,” “who were the victims of the wider campaign being conducted by the [union] generals.” The Workplace Ombudsman, Nicholas Wilson, stated that his office was disappointed by the courts decision and
would be considering the judgment. McArdle Legal will be sure to alert readers, should any other events occur.

Implications

It is surprisingly frequent for an employer to be reluctant to retrench the beneficiary of a generous redundancy scheme. Such employees can take little encouragement from this case. This judgment shows that the Tri Star case did not produce a “right to be sacked” principle.
The onus remains be on the employee to show that the employment relationship had effectively ended in order to obtain disputed redundancy benefits, where the employer maintains that they are being continued in their employment.

We are no closer to the development of an “obligation to provide work” in the employment relationship. As previously, for the most part the employer obligation is to provide income, and the employee obligation is to provide availability.

There is no sign that the Ombudsman will appeal.

Australian Unfair Dismissal Laws

In Australia, unfair dismissal laws are primarily governed by the Fair Work Act 2009. However, there are specific rules and exemptions for high-income employees, particularly those earning above the high-income threshold. As of July 1, 2023, the high-income threshold is $167,500 per year (indexed annually). Employees earning above this threshold may have limited access to unfair dismissal protections, depending on their employment arrangements.

Key Points for Employees Earning Over $170,000:

  1. Unfair Dismissal Protections:
    • Employees earning above the high-income threshold ($167,500 as of 2023) are generally not eligible to make an unfair dismissal claim under the Fair Work Act unless:
      • They are covered by a modern award or enterprise agreement, regardless of their income level.
      • Their employment contract guarantees them access to unfair dismissal protections (this is rare but possible).
  2. High-Income Threshold Exemption:
    • If an employee earns above the high-income threshold and is not covered by an award or enterprise agreement, they are excluded from unfair dismissal protections.
    • Employers can terminate their employment without risking an unfair dismissal claim, provided the termination is not in breach of the employment contract or other laws (e.g., discrimination or adverse action under the Fair Work Act).
  3. General Protections (Adverse Action):
    • Even if high-income employees are excluded from unfair dismissal protections, they are still covered by the general protections under the Fair Work Act. This means they cannot be dismissed for unlawful reasons, such as:
      • Exercising a workplace right (e.g., making a complaint or inquiry).
      • Discrimination based on race, gender, age, disability, etc.
      • Temporary absence due to illness or injury.
    • If an employee believes they were dismissed for an unlawful reason, they can file a general protections claim.
  4. Breach of Contract:
    • High-income employees may still pursue a claim for breach of contract if their dismissal violates the terms of their employment agreement. This is a civil matter and would be handled in a court (e.g., Federal Court or Supreme Court) rather than the Fair Work Commission.
  5. Redundancy Pay:
    • High-income employees may still be entitled to redundancy pay if their role is made redundant, unless their employment contract explicitly states otherwise.

Practical Implications:

  • Employers should ensure that termination of high-income employees is handled in accordance with the employment contract and general protections laws.
  • Employees earning above the high-income threshold should review their employment contract and seek legal advice if they believe their dismissal was unlawful or in breach of contract.

Summary:

Employees earning over $170,000 per year in Australia are generally excluded from unfair dismissal protections unless they are covered by an award or enterprise agreement. However, they retain rights under general protections and can pursue claims for breach of contract if applicable. Employers must still ensure dismissals are lawful and not in breach of other workplace laws.

For specific advice, employees and employers should consult a workplace relations lawyer or contact the Fair Work Ombudsman.

Benefits to Employers and Employees

No one is saying that these arrangements are not a good thing. Why they are being touted as some sort of major reform, is the point of mystery.

Local Shire Council not a constitutional corporation.

We now have conflicting rulings as to whether a local Council is a corporation for the purposes of Federal Employment legislation, although this is the most senior court so far. Eventually, the High Court will have to rule on the point. 20 August 2008, the Federal Court found that a Local Shire Council in Queensland was not a constitutional corporation under section 51(xx) of the Constitution. Consequently, this put it out of reach of federal industrial relations laws,
which are based on the Constitution’s corporations power and so the Council could not lodge an employee collective agreement with the Employment Advocate.

The Etheridge Shire Council entered into a collective agreement with some of its employees. It subsequently lodged the agreement with the Employment Advocate, asserting that it was entitled to enter into and lodge such an agreement, and held itself out as an “employer” as defined in the Workplace Relations Act 1996 (Cth). This was effectively the Councils attempt to move into the federal Industrial Relations sphere.

As a result of this, the Australian Workers Union and the Queensland Services Industrial Union commenced proceedings against the Council in the Federal Court, seeking declarations that the Council was not an employer within the meaning of the Act. They sought a consequential declaration from the Court that the Shire Council had not been entitled to lodge the agreement with the Employment Advocate.

The Unions argued that the Council was not an employer under the Act, because it did not come within the power granted to the Commonwealth in Section 51(xx) of the Constitution. It was not a trading corporation or a financial corporation within the meaning of that term due to the fact that it was a municipal corporation.

The Council provided evidence of its trading activities. These included: the operation of a visitors centre; the provision of hostel accommodation and a childcare centre; office space and residential property rental; sale of land and water; hire of halls; and the provision of services to the Commonwealth Government. The Council claimed that the diversity of these activities, clearly demonstrated that they were not simply a municipal corporation.

Spender J then provided a thorough analysis on the relevant case law in regards to constitutional corporations. On the basis of his findings, His Honour determined that there were two tests for establishing whether a particular corporation fell within the terms of section 51(xx).
1. A determination of the purpose for which the corporation was formed.
2. A consideration of whether the activities of the corporation were such as to bring it within the terms of section
51(xx).
His Honour then examined the High Court “Workchoices” decision in New South Wales v Commonwealth (2006) 229 CLR 1, which found that the activities test was to be determinative.
In applying the tests to the Council, his Honour determined that the Council was clearly not a trading corporation, primarily due to the fact that all of its “trading” activities were conducted at a loss. Thus the activities were carried out for the public benefit rather than in the course of trade.

Consequently, the Council was therefore neither a trading nor a financial corporation. Because of this, it was not entitled to seek registration of the Etheridge Agreement with the Employment Advocate.