Does a statute of limitations apply to certain proceedings under the former Workplace Relations Act 1996?

A pending decision by the Full Court of the Federal Court on the issue of statute of limitations will have significant implications for a number of current proceedings before the Courts, that allege certain contraventions of the former Workplace Relations Act 1996 (WR Act).

In August 2012, the Full Court heard an appeal by the Fair Work Ombudsman (FWO), against the decision of Federal Magistrate Raphael in Fair Work Ombudsman v Toyota Material Handling (NSW) Pty Limited & Ors [2012] FMCA 122 (FWO v Toyota).

The decision at first instance by the Federal Magistrates Court  involved an application by the FWO for declarations and penalties against Toyota for breaches of the WR Act.  However, Toyota claimed that the FWO’s application for penalties under the WR Act were subject to the 2 year limitation period set out in the NSW Limitation Act 1969 (NSW) (the NSW Act), and had been brought out of time.

The Federal Magistrates Court held that as the WR Act did not specify a limitation period, the NSW Act applied by virtue of section 79(1) of the Judiciary Act 1903 (Cth), which provides that:

“The laws of each State or Territory, including the laws relating to procedure, evidence, and the competency of witnesses, shall, except as otherwise provided by the Constitution or the laws of the Commonwealth, be binding on all Courts exercising federal jurisdiction in that state or Territory in all cases to which they are applicable”.

The Federal Magistrates Court agreed with Toyota that the relevant period was 2 years as provided for in section 18(1) of the NSW Act.  This provision states that:

“An action on a cause of action to recover a penalty or forfeiture, or sum by way of penalty or forfeiture, recoverable by virtue of an enactment, is not maintainable if brought after the expiration of a limitation period of two years running from the date on which theca sue of action first accrues to the plaintiff or to a person through whom the plaintiff claims”.

As the proceedings had been brought more than 2 years after the cause of action first arose, the Federal Magistrates Court summarily dismissed the FWO’s application for penalties. 

The decision has implications for a range of proceedings under the WR Act which do not have specified limitation periods in the WR Act, including the sham contracting provisions under section 900. 

The most significant proceeding, at least from a public perspective, is the prosecution of former Health Services Union National Secretary (and former Federal Member of the House of Representatives) by Fair Work Australia, in relation to alleged breaches of the obligations on officers of registered organisations.  These proceedings (General Manager of Fair Work Australia v Craig Thomson (VID798/2012) were initiated on 15 October 2012, however relate to contraventions of the WR Act that occurred before 30 June 2009, well outside the 2 year statute of limitations that would apply under Victorian and NSW law. 

Thomson’s solicitors have adopted the ‘Toyota’ argument in his Defence, pending the Full Court appeal decision.

The decision will not have any implications for contraventions of the Fair Work Act 2009 (FW Act), which clearly specifies a 6 year statute of limitations for all contraventions.

Compensation payment according to a social plan in Germany

The European Court of Justice had to decide whether it is valid to agree on compensation payments in a social plan, which takes into account that employees will be entitled to a pension payment due to age or a severe disability in the near future. According to the relevant social plan there are two ways to pay compensations: 

• “Standard calculation method”: The amount of compensation payment is calculated especially according to the job seniority.

• “Alternative calculation method”: This method is applicable for employees, who are older than 54 years. The compensation payment is calculated depending on the earliest beginning of the statutory pension payment, even if this early beginning is due to a severe disability. Although the amount of compensation payment may be smaller than the amount calculated according to the standard calculation method, the amount may not fall below half of the “standard” amount.

The European Court of Justice decided that it is valid to differentiate between employees who are young enough to find a new job and employees who will be entitled to a pension payment in the near future and therefore will probably not look for a new job. However, the court decided that it is a discrimination of severe disabled persons if the fact that they may be entitled to a pension payment even earlier is taken into account as these people face high costs due to their disability.

Employment equity plan trumps individual’s right to equality in South Africa!

This highly anticipated judgment handed down by the Labour Appeal Court on 2 November 2012, South African Police Services v Solidarity obo Barnard [2012] ZALAC 31, found that restitutionary measures, such as an employment equity plan, may trump an individual’s right to equality, in certain circumstances. 

The facts of the matter are briefly that Barnard was not appointed to the position of Superintendent at salary level 9, despite receiving the highest scores by the interview panel on two occasions.  Barnard was not appointed as her appointment would have been counter-productive to the SAPS’s employment equity plan and would have resulted in an over representation of white females and white employees at salary level 9.

Being dissatisfied, Barnard pursued an internal grievance and thereafter referred the matter to the CCMA.  The matter was later referred to the Labour Court which found that the Employment Equity Act of 1998 (EEA) and employment equity plans should be applied in accordance with the principles of fairness and with due regard to the affected individual’s constitutional right to equality and dignity.  The Labour Court found that the SAPS had failed to discharge the onus that not appointing Barnard was fair and found that she was unfairly discriminated against.

On appeal, the SAPS submitted that the Labour Court was misdirected in finding that Barnard’s non-appointment was unfair and inconsistent with the objectives of the EEA.

In essence, the Labour Appeal Court had to determine whether the implementation of equity orientated measures should be limited in the event that such implementation would adversely affect people from non-designated groups.

The Labour Appeal Court found that the role of an employment equity plan is to ensure that decisions about appointments in the context of affirmative action are not arbitrary.  The Labour Appeal Court referred to the National Instruction which provides that the National Commissioner is under no obligation to fill an advertised post and that he may direct that a post be re-advertised or promote a candidate from the preference list, other than the recommended candidate.

The Labour Appeal Court found that the Labour Court misconstrued the purpose of employment equity orientated measures by finding that the implementation thereof was subject to an individual’s right to equality and dignity.

The appeal was upheld with no order as to costs, given the important constitutional questions raised regarding employment equity oriented measures. 

This judgment ultimately means that employers who act in accordance with their employment equity plans will not be unfairly discriminating against employees from non-designated groups, as long as the decision is not arbitrary.

When does an act of goodwill become a benefit?

Companies are here to do business. They employ employees in certain working conditions on specified terms and conditions of employment. Difficulties arise when the employer, due to various reasons, wishes to change these terms and conditions of employment.  Our labour law differentiates between existing terms and conditions of employment, benefits and work practices. 

Terms and conditions of employment may only be varied by consent or for operational reasons following a s189 process stipulated by the Labour Relations Act. Benefits may be varied or removed for a good reason after a fair process has been followed. Changes to work place practices may be brought about through the exercise of managerial prerogative.

Our labour courts up to our labour appeal court have had divergent opinions on whether an employee may claim a benefit under our unfair labour practice dispensation when he has no claim in contract or law.

On 18 June 2012, Judge Steenkamp in South African Post Office Ltd v Commission for Conciliation, Mediation and Arbitration and others rejected the contention of Judge Lagrange in IMATU obo Verster v Umhlathuze Municipality & others where the court found that a benefit does not need to be established contractually or by legislation but could be anything extra which have been granted at the employer’s discretion

Judge Lagrange in the IMATU matter referred to the labour appeal court decision of Department of Justice v the CCMA, which was decided in 2004.

Judge Steenkamp in the South African Post Office matter referred to the labour appeal court’s decision in Gauteng Provinsiale Administrasie v Scheepers and subsequent labour and labour appeal court decisions. He found that claims pursued as unfair labour practices can only be pursued if the employees can prove that they are entitled to a benefit claimed under contract or statute.

In this matter, Elton Jacobs was employed as a operational manager with the Post Office and was asked to act in a higher authority on a few occasions. His acting allowance was only approved in April 2006 and no further allowances were granted by the applicable authority as per the Post Office policy since then. The employee claimed that others were paid acting allowances but not him. 

The labour court, on interpreting the policy, found that the policy provided a limited right to an acting allowance if it was approved. The fact that approval was required meant that there was no automatic contractual entitlement to the acting allowance.

The court found that the employee had not established a right to an acting allowance contractually or in law beyond the initial 3 month period and to seek an entitlement beyond that would cause it to be an interest dispute.

Duty to mitigate

In Chandran v National Bank 2012 ONCA 205 (CanLII), the Ontario Court of Appeal clarified that an employee is not required to mitigate by taking a demotion in the wake of being constructively dismissed where the employee would be subject to an atmosphere of embarrassment or humiliation.

Mr. Chandran started his employment with the Bank in 1989 as an account trainee. Over the next 18 years, he worked his way up to the position of senior manager of the Vaughan Commercial Banking Centre. In 2007, an informal employee satisfaction survey revealed Mr. Chandran had engaged in bullying behaviours. When confronted with these allegations, Mr. Chandran denied the behaviour. However, no investigation was undertaken by the Bank to ascertain the veracity of the complaints and Mr. Chandran was soon after issued a disciplinary letter, the effect of which, the Court found, was to provide Mr. Chandran with a  final warning. The Bank removed Mr. Chandran from his supervisory role and offered two alternate positions. Mr. Chandran felt those positions represented a demotion with respect to prestige, compensation and grade level.

Mr. Chandran took the position that he had lost all trust in the Bank to deal with him in a fair and professional manner. The Court agreed with Mr. Chandran and held that the actions of the Bank went to the root of the employment contract, fundamentally breaching the employment agreement and constituting a constructive dismissal.

On the basis of Evans v Teamsters, Local 31, 2008 SCC 20 (CanLII) (“Evans”) the Bank argued Mr. Chandran should have accepted one of the two offered positions while he searched for alternative employment and by refusing he failed to fulfill his obligation to mitigate his damages. The Trial Judge considered whether the transfer and the disciplinary letter constituted a constructive dismissal. If the answer to this question was found to be affirmative, the Court then had to decide if the employee had an obligation to mitigate his damages by accepting one of the two positions offered. At trial the Court found that Mr. Chandran had been constructively dismissed as any reasonable person in his position would find that the disciplinary letter and demotion went to the core of the essential terms of the employment contract. With respect to mitigation, the Trial Judge distinguished Evans finding that Mr. Chandran “would have been subjected to ‘an atmosphere of embarrassment or humiliation’ in an environment where he could not expect that his employer would not act to put ‘his interests in jeopardy’ if he had accepted reemployment.”

On appeal, the Bank contended that the Trial Judge erred by concluding that Mr. Chandran was not required to mitigate his damages by accepting one of the two offered positions. However, in an unanimous decision, the Court of Appeal found no palpable and overriding error in the reasoning of the Trial Judge.

When faced with a complaint against an employee, employers should ensure that they complete proper investigations prior to disciplining or demoting an employee, or they may face a claim of constructive dismissal. While, in general, an employee who is constructively dismissed must mitigate his or her damages, including by taking a job with the former employer,  this decisions suggests that the employee is not required to accept a position that resembles a demotion or disciplinary action, particularly where the employee held a senior position.

The assistance of Jessica Allen, articling student at Norton Rose Canada LLP, is greatly appreciated.