21 July 2020
The Full Bench of the Fair Work Commission has, in a recent decision, determined that a JobKeeper enabling stand down direction which “disproportionately and unfairly affects one category of employee over another” was unfair and unreasonable and therefore unenforceable.
Temporary amendments to the Fair Work Act 2009 (Fair Work Act) permit employers who are participating in the JobKeeper scheme to direct their employees to work a reduced number of hours provided that the direction is not “unreasonable in all of the circumstances.”
On 3 June 2020, Prosegur Australia Pty Limited (Prosegur) issued the JobKeeper enabling stand down direction (Direction) that formed the centre of this dispute. The effect of the Direction was to temporarily change the normal working hours of Prosegur’s full-time, part-time and long-term regular casual employees to an equal 25 hours per week for each employee in order to best utilise the JobKeeper wage subsidy.
The Transport Workers’ Union (TWU) filed a dispute application against Prosegur in the Fair Work Commission seeking an order to set aside the Direction on the basis that the disproportionate reduction of hours made the Direction “unreasonable in all of the circumstances” pursuant to section 789GK of the Fair Work Act. The TWU argued that the Direction had a disproportionate impact on Prosegur’s full-time employees (who previously worked up to 50 hours per week) as opposed to its part-time employees (who previously worked up to 30-35 hours per week) and long term casual employees.
At first instance, the Commission found in favour of Prosegur, determining that the Direction was not unreasonable. However, the TWU lodged an appeal on the basis that the Commission had misinterpreted the concept of “unreasonableness” and had not had sufficient regard to the relevant circumstances of the relevant employee.
What is the meaning of “unreasonable”?
On appeal, the TWU submitted that the Commission had inappropriately applied an administrative law construction of an “unreasonable” decision which is one that is “irrational, illogical or so unreasonable that no reasonable person could have arrived at it.”
The TWU submitted that, in determining whether the Direction was “unreasonable in all of the circumstances,” the Commission should have considered the relevant circumstances of the employer and employee rather than merely determining whether the Direction had a “rational or logical basis.”
The Full Bench upheld the TWU’s argument and found that the Commission, in relying upon an administrative law concept of “unreasonableness”, had failed to adequately take account of “notions of fairness and inequality as between the employer and employee.” The Full Bench preferred an interpretation of unreasonableness construed by Bromberg J in a Federal Court industrial law case, AEU v State of Victoria . In that case, Bromberg J had declared that, in the context of the Fair Work Act, the most appropriate definition of ‘unreasonable’ is “inequitable, unfair; unjustifiable.”
Circumstances to be considered
The Full Bench further determined that an assessment of whether the Direction is “unreasonable in the circumstances” must take into account the relevant circumstances and interests of the employers and employees respectively.
In particular, the Full Bench noted that the power to make a JobKeeper enabling stand down direction authorises considerable interference with the employee’s entitlements under the Fair Work Act, modern awards, enterprise agreements or their contract of employment. Since the most significant qualification to this power is the requirement of that the direction is not “unreasonable in all of the circumstances”, the Full Bench considered that this requirement must be designed to protect employees from an unreasonable use of the power. Accordingly, the Full Bench held that the legislation “directs attention to the interests of the employee in an assessment of what is unreasonable.”
Was the Direction “unreasonable in all of the circumstances”?
Applying the industrial law concept of unreasonableness and taking into account the relevant circumstances of the employees as well as Prosegur, the Full Bench considered that an assessment of the Direction’s reasonableness must consider “whether the deprivation or reduction of pre-existing entitlements to hours of work disproportionately and unfairly affects one category of employee over another”. In this respect, the Full Bench determined that the Direction “impose[d] a disproportionate reduction in entitlements for full-time employees” and commented that it is “unusual and, prima facie, unfair” that part-time employees would be allocated the same (or more) hours than full-time employees, while reducing a full-time employee’s ordinary hours.
The Full Bench noted that it would not be necessary to issue a JobKeeper enabling direction in order to reduce a casual employees’ hours since casuals do not typically have a set number of ordinary hours. However, the Full Bench noted that it may be reasonable for a business to give casual employees some certainty as to their hours, while also providing for the employer to derive some commercial value from the JobKeeper subsidy.
The Full Bench upheld the appeal and directed the parties to confer between themselves. If the parties are unable to resolve the dispute themselves, the matter will be referred for arbitration.
Lessons for employers
Employers should be mindful that they avoid issuing blanket JobKeeper enabling stand down directions to different categories of employees, without first assessing the overall and individual impact of the direction on those employees and the relative fairness between those employees. In particular, if the effect of a direction was to increase the ordinary hours of part-time employees in circumstances where full-time employees were having their ordinary hours reduced, that will likely be considered as unreasonable and unfair.
The information in this publication is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, we do not guarantee that the information in this newsletter is accurate at the date it is received or that it will continue to be accurate in the future.