Quarterly Case Law Round-Up and Learnings for Employers

There have been a number of interesting and noteworthy cases determined by our judiciary in the employment law space in the last quarter. In this legal briefing we provide an overview of two significant cases. The first of the two highlights the challenge faced by employers in relying upon the opinions of medical professionals in determining whether (or not) an employee can perform the inherent requirements of the role for which they are employed and how employers ought to go about reconciling conflicting medical opinions about an employee’s fitness for work. The second matter relates to the exception available to employers under the National Employment Standards from the obligation to make severance payments in the case of a redundancy in circumstances where the impacted employee’s position is no longer required “due to the ordinary and customer turnover of labour”. In a landmark Federal Court decision, this elusive phrase which had previously been, for the most part untested, has now received proper and considered judicial scrutiny.

In addition, we provide an update to our readers in relation to the approval by the Fair Work Commission of the merger between the Construction, Forestry, Mining and Energy Union (“CFMEU”), the Maritime Union of Australia (“MUA”) and the Textile, Clothing and Footwear Union of Australia (“TCFUA”) effective this month.

Independent Fitness for Work Examinations

In circumstances where an employee is injured, whether during or outside of the workplace and regardless of whether such injury is physical or otherwise, it is not uncommon for employers to require injured workers to undergo fitness for work examinations by independent medical practitioners in order to determine their fitness for work. In determining, however, if an employee is medically capable of returning to work, it follows that employers are often required to rely on the opinions of medical professionals. But what happens when medical opinions are inconsistent, how does an employer choose the appropriate opinion upon which to rely?

In the recent decision of CSL Limited t/a BSL Behring v Papaioannou [2018] FWCFB 1005 (“CSL”), the Full Bench of the Fair Work Commission considered this controversial issue. The matter dealt with an unfair dismissal hearing where there were conflicting medical opinions. In short, the Commission overcame the issue by determining that, when there is a conflict between medical opinions, it is the Commission that must decide which opinion is preferred. This decision is important because, unlike in previously authorities where the Commission chose not to question an employer’s assessment of the medical evidence available to them, in this instance, the Full Bench chose to look behind the employer’s decision-making process. Significantly, the implication for employers of this decision is that the Commission will not simply accept on face value their assessment of the medical evidence, and employers will bear a positive evidentiary burden to show they have sufficiently considered and assessed the relative weight of conflicting medical opinions.

The approach adopted in CSL is a stark departure from the previous approach adopted in Jetstar Airways Pty Ltd v Neeteson-Lemkes [2013] FWCFB 9075 (“Jetstar”) in determining whether a valid reason for termination existed at the time of the dismissal. In Jetstar it was held that the Commission’s role was to consider and make a finding as to whether, at the time of dismissal, the employee suffered from an incapacity based on the relevant medical and other evidence before it. The Commission held that in effect they could look behind the employer’s decision, and make their own determination based on the conflicting medical evidence.

By way of contrast, the Full Bench in Lion Dairy & Drinks Milk Ltd v Norman [2016] FWCFB 4218 (“Norman”) found that it was not for the Commission to make an expert medical assessment of the evidence. Rather, in establishing a valid reason for dismissal, an employer was entitled to rely on the medical report prepared by a professional medical practitioner and this would constitute an entirely defensible position. In the event of a conflict between medical opinions, it was incumbent on the employer to resolve that conflict.

The CSL decision now resolves the divergent approach between the Jetstar and Norman decisions, by ultimately adopting the reasoning in Jetstar. In this regard, the Commission observed that in determining whether there is a valid reason for dismissal on the basis of incapacity, the Commission must consider and make findings as to whether the employee concerned suffered from the alleged incapacity. That finding is to be based on relevant medical and other evidence that is produced before the Commission and no particular weight is given to the opinion of the employer as to their preferred evidence, rather this assessment is to be made by the Commission, acting reasonably.

The CSL decision has far-reaching implications for employers, notably because employers now cannot rely on their own determination of the conflicting medical opinions in satisfying the test as to whether there was a valid reason for termination. Employers must now take extra care to analyse conflicting medical evidence and make a proper assessment as to which opinion to follow. To that end, the CSL decision offers no guidance to employers as to the steps to be taken in weighing up competing medical evidence, and any decision to terminate an employee on the basis of fitness to work, is fraught with danger. In an effort to assist employers however, relevant factors that should be considered include:

• whether the medical practitioner is a treating practitioner or an independent medical examiner;
• to the extend the treating doctor’s opinion conflicts with the expert, consider getting a further expert opinion;
• the relative qualifications of each medical practitioner, for example whether they are a specialist or a general practitioner;
• the relevance of the qualifications of the particular medical practitioner to the incapacity or injury to which the employee is suffering; and
• the nature and breadth of the information provided to the medical practioner regarding the requirements of the role.

In light of the CSL decision employers must ensure they have defensible grounds based on cogent medical evidence to terminate an employee’s employment on the basis of their incapacity to perform the inherent requirements of the role for which they were employed. In circumstances where the medical evidence is conflicting, employers must carefully weigh up the conflicting medical evidence and make an assessment as to which opinion should be preferred. To be in the best position to make this assessment, we recommend employers ought to:

• ensure that the employee is no longer temporarily absent because of illness or injury within the meaning of the Fair Work Act 2009 (Cth);
• engage an expert medical specialist to examine the employee. If there is a clash of opinion, the employer should ensure that the conclusions reached in the independent report are sound and defensible;
• invite the employee’s treating medical practitioner to comment on the independent report;
• seek further clarifying medical evidence if so warranted;
• assess whether the medical specialist who produced the report will be able to substantiate it in any legal proceedings;
• act swiftly upon receipt of a medical opinion so that a decision to end employment is reasonably proximate with the date of the medical report; and
• meet with the employee to ascertain whether there is any other information the employer should take into account prior to enacting the termination.

What does “ordinary and customary turnover of labour” mean?

In a landmark ruling, the Federal Court found that a Spotless subsidiary failed to meet its obligations under the Fair Work Act 2009 (Cth) to provide notice and severance pay to employees – some with 15 to 20 years service – when it lost a valuable cleaning services contract at a major shopping complex.

Justice Reeves’ recent decision in United Voice v Berkeley Challenge Pty Limited [2018] FCA 224 (“Berkeley”) found that when Berkeley purportedly gave notice of termination to some 21 affected employees, it in fact was really notifying them that their positions were redundant as it had lost its cleaning and security contract at Sunshine Coast Plaza Shopping Centre, which it had held for almost 20 years. However, Berkeley took the view that it was not required to pay any redundancy payments as its was exempt by law. To that end, Berkeley claimed that it was exempt from the severance pay obligations under the National Employment Standards because of the exception that applies when a role is redundant “due to the ordinary and customary turnover of labour”. It has long been a practice in industries such as the cleaning industry that due to the frequent change of contracts and the fact that employment depends entirely on the existence of a contract to perform the work, that the loss of a contract resulting in termination of employment, constitutes a “customary turnover of labour”. However, Justice Reeves found in these circumstances, against the company’s construction of the provision, noting that: “to sum up, the exception applies if a particular employer decides to terminate a particular employee’s employment and to render that employee’s job redundant in circumstances where the redundancy component of that decision is for that employer, with respect to its labour turnover, both common, or usual, and a matter of long-continued practice”.

Accordingly, his Honour held that in this particular case, the evidence showed the opposite.  The contract had been on foot for a period of 20 years, the employees had been employed for significant periods of time in the one place and on no basis was the termination of the roles in question for reasons of redundancy connected to a matter of long-standing practice by the employer that labour turnover was common, or usual. As the exception did not apply, the Court found that Berkeley was liable to pay notice and severance entitlements to all affected employees, which according to the union, amounted to $200,000 in total. Relevantly, this particular decision is significant for the contracting services industry, and in particular the cleaning sector, as it dispenses with the concept that the term “ordinary and customary turnover of labour” applies as a blanket exception to relieve an employer of its redundancy obligations when employees are made redundant as the result of a loss of a client contract.

Super Union Merger Update

On 6 March 2018, the Fair Work Commission green-lit an application by the unions who currently represent employees in the construction, forestry, mining, and energy industries, the manufacturing industry and the textile industry being the CFMEU, MUA and the TCFUA to merge and form one new “super union”. This decision has sparked widespread concern within the business community. The decision means that the newly formed super union will have a combined total of 144,000 members, revenue of $146 million a year and $310 million in assets. The merger was strenuously opposed by employer groups with fears that the new union organisation would create a militant environment in which union delegates could operate with disregard for the law. We understand that employer groups are now assessing possible appeal avenues, including to the Federal Court of Australia, on the basis that the merger should not proceed until it passes the Federal government’s proposed “public interest” test. We will keep our readers informed of any developments in relation to this matter.

If any further information in relation to any aspect of this alert is required, or should you wish us to provide advice or assistance in relation to an employment or industrial law issue, please do not hesitate to contact us.

This alert is not intended to constitute, and should not be treated as, legal advice.