5 HR hotspots that can legally get you in trouble


Recent court and tribunal decisions have highlighted areas that may generate legal risk for people managers.

Charles Power, Partner and Workplace Relations Specialist from Holding Redlich, explains the sticking points when it comes to employment law and how to avoid legal exposure.

1. Investigative suspensions

If allegations of serious misconduct are levelled against an employee, they can be suspended on full pay while the allegations are investigated. This might be justified to protect other people in the organisation and the business itself.

However, if this kind of suspension isn’t expressly provided for in the employment contract, don’t assume that it is an implied or unwritten right under the contract.

In a 2015 decision in the Supreme Court of Victoria (Actrol Parts Pty Ltd v Coppi), Justice Bell would not imply such a power “because it would be inconsistent with the managerial nature of [the employee’s] position and modern conceptions of the personal importance of, and dignity that is derived from, work”.

The right to suspend employees on full pay and conditions during a disciplinary process should be written into employment contracts, particularly those applicable to executives and professional employees.

2. Bonuses and incentives

A series of rulings suggests a greater willingness of courts to interfere with the actions taken in implementing bonus and incentive schemes, particularly where it leads to unreasonable or irrational outcomes. In the 2014 case of UGL Services v Janik, the New South Wales Court of Appeal considered the employer’s discretion to grant executive share options under an incentive scheme.

It found that there was an implied term requiring the discretion to be exercised honestly, not arbitrarily or capriciously, and consistent with the proper scope and content of the incentive scheme. This was despite the contract making it clear the discretion was “absolute and unfettered”.

Many legal disputes can be avoided by careful drafting of the rules of incentive schemes. The areas where discretion will be exercised and the objects of the scheme should be clearly defined. The issue of whether pro rata incentive payments will be made, and in what circumstances, should be expressly covered.

3. Social media rules

Social media presents great opportunities for your business, but also great risks. If your staff’s social media activities could have an impact on your organisation, you need modern, durable and enforceable rules.

In Starr v Department of Human Services this year, Fair Work Commission vice-president Adam Hatcher said the commission will back an employer’s right to control an employee's private social media activity through policy only if the activity is likely to cause serious damage to the employment relationship or the employer’s interests or otherwise be incompatible with the employee's duty as an employee.

This means employers need to carefully consider the potential impact and harm to their interests from online conduct and draft rules for behaviour that are measured, tailored and proportionate.

4. Inventive employees

An employer owns the intellectual property in the material its employees create in the course of their employment. However, the fact that an employee creates new designs for products to be sold doesn’t automatically mean the employer owns the intellectual property in those designs.

In Courier Pete Pty Ltd v Metroll Queensland Pty Ltd in 2010, a foreman working in a factory that manufactured and supplied rainwater tanks applied to register designs he invented while at work. The foreman’s employment contract was of a very general nature and didn’t define the scope of his employment with any precision. It didn’t say that his duties included creating inventions or new designs, nor did it address the issue of ownership of new designs.

The court ruled that the employee created the tank designs at home and in his own time, and therefore owned them.

If an employee's duties are to include creating things that give rise to intellectual rights, make sure the contract states “the employee's duties include invention and creativity, and the employer owns all resulting intellectual property rights”.

5. Equal opportunity and bullying policies, and

Many procedures in equal opportunity or bullying policies aren’t effective and will potentially worsen the situation because they lock the employer into mandatory investigation of complaints. In some circumstances, a more enduring resolution to the matter can be achieved through informal counselling or conciliation leading to agreed undertakings about future behaviours.

When you make adverse decisions in relation to staff in such areas as flexible work arrangements and managing work performance, you are increasingly liable to challenge under the Fair Work Act general protections scheme. This risk will be mitigated if you establish guidelines and document processes to ensure more rigour, consistency and transparency in the reasons behind these adverse decisions.

This post is intended to provide general information in relation to a legal topic from a qualified legal practitioner external to SEEK. It does not constitute legal advice and should not be relied upon as such. Formal legal advice should be sought in particular matters.

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About the author

Charles Power

Holding Redlich

Workplace Relations Specialist and Partner

Charles Power is workplace relations specialist and partner at law firm Holding Redlich. For over 25 years, Charles has helped businesses manage their work relationships in ways that are consistent with legal requirements and best practice.

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