Tuesday, 21 May 2019

The Truth About 5 Common Workplace Myths

Myth #1 – Three strikes and you’re out

A common workplace myth we often come across is that an employee must be issued three warnings prior to their employment being legitimately terminated. However, this ‘3 warning requirement’ is not, and never has been, enshrined in legislation.

As a rule of thumb, employees who are eligible to make unfair dismissal claims should usually be issued a warning prior to being terminated for poor performance. However, whether the employee receives one warning (for performance and/or conduct issues), multiple warnings, or no warnings at all (for misconduct), should be determined on a case-by-case basis. The Fair Work Commission will consider each case based on its merits.

Ideally, performance management and disciplinary policies should avoid committing to a certain number of warnings as this reduces flexibility for the employer – and if the policy is not complied with, this can impact procedural fairness in an unfair dismissal claim.

Myth #2 – If a worker is brought on as an independent contractor, minimum pay rates don’t apply.

It is widely accepted that genuine independent contractors set their own rates and their engagement is not governed by the minimum safety net which applies to employees. However, just because the agreement which governs their engagement identifies them as an ‘independent contractor’, it does not mean workplace laws do not apply. Indeed, approaching contractor arrangements without caution can result in significant legal exposure.

The Courts have developed a number of tests – the ‘duck test’, the ‘multifactor test’ and the ‘entrepreneur test’ to name a few – to ascertain whether the relationship is truly one of independent contractor and principal.

Incorrectly classifying an individual as a contractor gives rise to risks for failing to provide minimum employee entitlements and superannuation. Additionally, arrangements directed at avoiding the payment of employee entitlements – ‘sham arrangements’ – can result in penalties being imposed on the business engaging the contractor, in addition to unpaid wages/entitlements.

Myth #3 – You can fire an employee at any time and for any reason without legal risk,  during their probationary period.

According to the Fair Work Act (the Act), during the first 6 months of an employee’s employment, an employee is not eligible to bring an unfair dismissal claim in the Fair Work Commission. This is known as the ‘minimum employment period’. The minimum employment period is extended to 12 months for employees of small businesses (ie with less than 15 employees).

If an employee’s contract provides for a longer probationary period beyond this “minimum employment period”, it will not work in preventing the employee bringing an unfair dismissal claim.

Further, even if an employee has not completed the minimum employment period, there may be other types of claims that can be brought. One such option is a general protections claim, which can be pursued on the basis that the employee was subjected to adverse action (dismissal) for a protected reason (e.g. a discriminatory reason, or because they exercised a workplace right). This type of claim is not subject to a minimum employment period.

Ultimately, dismissing an employee during the minimum employment period is never completely risk-free and employers should consider the whole circumstances and potential legal risks prior to dismissal.

Myth #4 – Employees can’t take leave until they have been with an employer for at least a year.

While employers understand that each year permanent employees are entitled to 4 weeks of annual leave, and 10 days of paid personal/carer’s leave, there appears to remain a lack of clarity around how that entitlement accrues.

Under the National Employment Standards, annual and personal leave accrue progressively. This means that instead of accruing all at once and ‘refreshing’ each year, paid leave builds up proportionately from the beginning of employment. This means, for example, that after 3 months of continuous employment, a full-time employee would have 1 week of annual leave and 2.5 days of paid personal/carer’s leave available.

In saying this, some enterprise agreements provide for a more beneficial entitlements to annual/personal leave including enabling the crediting of leave up front. Employers should have regard to the applicable industrial instrument in determining how leave is accrued in their specific workplace.

Myth #5 – It is always okay to bring prospective employees on for unpaid work trials to make sure they can do the job.

Many employers engage workers in unpaid trials as part of the recruitment process, to ensure their suitability for the job or to provide valuable work experience under the guise of an unpaid ‘internship’.

Some employers stretch unpaid trails to weeks, or even months, at this stage the Fair Work Ombudsman generally takes an unfavourable view of the practice as it begins to look too much like unpaid employment. Similarly, workers on unpaid trials should not be performing work that creates value for the business, as the purpose of the trial should be learning and familiarisation with the role under direct supervision.

While unpaid trials can be conducted legally and in limited circumstances, the trials should only occur before the prospective employee commences employment and significant care and attention should be given to ensure they don’t cross the line into a breach of the law.


This article was produced by HR Legal. It is intended to provide general information only in summary format on legal issues. It does not constitute legal advice, and should not be relied on as such.