There is nothing permanent except change and it would be rare for any change within an organisation not to impact the people working for it. Kathryn Dent and Margaret Chan outline some of the risks and key lookouts for employers when introducing workplace change.
There is nothing permanent except change and it would be rare for any change within an organisation not to impact the people working for it. Kathryn Dent and Margaret Chan outline some of the risks and key lookouts for employers when introducing workplace change.
In a recent webinar hosted by People + Culture Strategies, we discussed the significant implications of the Federal Court’s decision in Barker v Commonwealth Bank of Australia (“Barker”) for organisations seeking to implement changes to employment contracts, whether by way of change resulting in termination of employment (as often happens during restructuring) or otherwise. Although Barker was appealed to the Full Federal Court (judgment is currently reserved), the finding at first instance was that an employer’s breach of its redundancy policy amounted to a breach of the implied duty of mutual trust and confidence. This duty is that a party to the employment relationship “will not, without a reasonable or proper cause, conduct themselves in a manner which is likely to destroy or seriously damage the relationship of trust and confidence”.
The breach of this duty in Barker by the Commonwealth Bank’s failure to take “timely and meaningful steps” to follow its redeployment policy – even though it was expressed as to “not form any part of an employee’s contract of employment” – resulted in compensable damage in excess of $300,000. The lesson from Barker is that, given the inability of employers to rely only on the written contract of employment as the sole authority of the process of implementing change, employers need to consider the risks inherent in introducing and managing change before such change is actioned, and further, to consider the issues which may influence the success of the change – such as communication and treatment of employees.
Provisions you should look out for
Where the change involves redundancies, employers may also have additional obligations under the Fair Work Act 2009 (Cth) (“FW Act”) and any applicable Awards, Enterprise Agreements, contracts and policies – specifically the obligation to notify and consult with employees.
In addition to consultation obligations, section 389 of the FW Act provides that it will only be a “genuine redundancy”, and therefore an exception to claims of unfair dismissal, if the employer has considered “reasonable redeployment” within its organisation and that of “associated entities”. There are also additional notification requirements under Part 3–6 of the FW Act where 15 or more employees will be dismissed.
Process
If an employer decides to vary an employment contract – e.g. to effect a salary cut or demotion, to relocate an employee or to alter a reporting line – the extent to which they can do this without consent depends on how flexibly the contract is worded to accommodate future change. In the absence of such flexibility an employer will not be able to make unilateral changes to the contract without risking a breach of contract action (or other claims such as unfair dismissal, and if for a “prohibited reason” – discrimination or adverse action claim).
Where substantial changes are accepted by employees but not documented in writing, there is also the risk that a new contract may come into existence combining implied and verbal terms which do not necessarily accord with the original contract and which may be difficult to prove at a later date. For this reason, any variation should be documented in writing and the employer should take the opportunity to confirm what other terms and conditions apply, referring to the original contract of employment where applicable.
A recorded version of the webinar is available for purchase. Please contact Corinne Ozols on (02) 8094 3100.
About the author
Kathryn Dent is a Director of People + Culture Strategies. For further information, phone 02 8094 3107 or email [email protected]. Margaret Chan is an Associate at People + Culture Strategies – phone 02 8094 3116 or email [email protected]
