Chapter 5 Law of Empoyment

The labourer is worthy of his hire. 1

In this chapter

Employer/Employee Relationship.

(a) Definition
(b) Common Law Duties of Employers
(c) Common Law Duties of Employees
Liability of Employer in Tort & Contract

(a) Tort
(b) Contract
Ending Employment

(a) Generally
(b) Giving Notice
(c) When the Job Cannot be Done
(d) Misconduct
(e) Remedies for Unlawful Termination
Statutes Modifying the Employer/Employee Relationship

(a) Workers Compensation
(b) Health & Safety
(c) Equal Opportunity
(d) Industrial Disputes
(e) Industrial Awards
(f) Payment of Wages
(g) Harsh or Unfair Work Arrangements
(h) Enterprise Bargaining
(i) Long Service Leave Act, 1955 (N.S.W.)
(j) Annual Holidays Act, 1944 (N.S.W.)
(k) Maternity Leave

1. Employer/Employee Relationship.


(a)	Definition.

There are many ways in which a person performs work either for himself or 
for another person. The arrangement may take the form of a partnership or it 
may be a sub-contracting agreement or one person acting as an agent of 
another. The particular arrangement dealt with here is what is called the 
master-servant relationship.

The master-servant relationship is very old. Traditionally such relationships 
or agreements to work were regarded as private arrangements between the 
master (employer) and the servant (employee). The court seldom interfered 
with these relationships and Parliament when it intervened did so on the side 
of the master. Increasingly however Parliament moved to regulate the 
master-servant relationship and today it is governed by a very large amount 
of legislation.

The law draws a line between contracts of service (employment contracts) 
and contracts for services (such as the contract with your solicitor or 
doctor). To distinguish the different types of contract there is no single, 
simple test that can be applied to ever situation. It is more a matter of of a 
court weighing up a number of factors, such as, one party is under the the 
"control" of another, that one party is sufficiently "part and parcel of the 
organisation", is "integrated into the organisation" or is "economically 
dependent" upon the other so as to make the "controlled" or "dependant" 
party an employee.

Traditionally the courts looked for a degree of control by one party over 
another with the superior party (the master) dictating to the inferior party 
(the servant) not only what job was to be done but how it was to be done. 
The growth of large organisations and the acceleration in technology have 
meant that the traditional "control" test can no longer be applied. In recent 
cases 2 the totality of the relationship is considered by asking 
questions such as:

(i)	How money is paid. Regular payment of wages suggests an 
employment relationship.

(ii)	Workplace. In an employment relationship the workplace does not 
usually change but where people can work where they choose are 
usually independent contractors.

(iii)	Work hours. Are usually set for an employee.

(iv)	Income tax. Employees normally have income tax deducted from 
their wages.

(v)	Power to delegate. The contract of employment is personal in 
nature and a worker is not able to send someone else along to do 
his job in his place.

(vi)	Tools & equipment. If the worker provides all of his own tools and 
equipment it is unlikely that the law will say he is an employee.

(vii)	The intention of the parties. Sometimes the parties will state 
expressly that their arrangement is that of principal and independent 
contractor but this is only one factor to be taken into account. The 
question of whether or not the arrangement is or is not a contract of 
employment is a question of law, not fact. The court is Australia are 
alert to ensure that arrangements are not allowed which have the 
effect of avoiding the operation of legislative protections. There 
have been a number of reported cases where, despite the expressed 
intention of the parties, the courts have held the arrangement to be a 
sham and have ruled that in law the arrangement is a contract of 
employment.

(viii)	Control. The ultimate exercise of the right to control is in the hiring 
and firing area. The courts will look for the reality of control over 
the conduct of the job. Here again while the written document may 
say that the arrangement is not one of master and servant, the court 
may well look to the reality of the situation and hold that one side to 
the arrangement is in fact (and in law) controlled by the other so as 
to create a master-servant contract.

An employment contract binds the parties to all the terms and conditions 
stated in the agreement. Since many employers and employees do not 
actually spell out all the terms of their agreement, the courts have developed 
a set of promises which they will imply into every contract of employment. 
The implied terms are binding even when the parties did not see them as part 
of their agreement. Implied terms come from what the court feels is required 
by current community standards and expectations. The may also be taken 
from the customs and practices in a particular industry or workplace.

Implied terms give legal duties to both workers and employers. Although 
called duties here, one parties duty to another is the other party's right e.g. 
the employer's duty to provide a safe place to work is essentially the 
worker's right to have a safe work environment.

(b)	Common Law Duties of Employers.

(i)	Safety.

An employer must employ competent employees, provide a safe place of 
work, provide safe equipment and materials and provide a safe system of 
work. The employer must not only see that his employees are competent 
and appropriately qualified for the task they are given but must make sure 
that the tasks are carried out safely. It may well be that this duty extends to 
re-training of employees and the up-dating of technical and professional 
knowledge.

The employer must use reasonable care and supervision to see that the place 
of work is safe and remains safe. The place of work includes: the actual 
place of employment; ancillary areas e.g. toilets, hallways, recreation areas; 
and where employees must go in the course of his employment.

The employer must use reasonable care and supervision to see that plant, 
equipment and materials are safe and remain so. This duty extends to the 
provision by the employer of proper and suitable safety equipment.

The employer must use reasonable care and supervision to see that there is a 
safe system of work and that it remains safe. It is not easy to define 
"system" and each case depends upon its own facts.

Prior to the Workers Compensation Act, 1987 where an employer had 
breached this duty of safety to his employees he could be sued in tort for 
damages. However, this right in N.S.W. has been severely restricted.

(ii)	To Provide Work.

As a general rule there is no duty on an employer to provide work. 
However, where there is only one way in which an employee can earn 
wages, e.g. by piece work or by earning a commission on sales, it seems 
that the employer has a duty to ensure that the employee has opportunities to 
earn money. The employer will be in breach of contract if the employee is 
not allowed to work. A similar situation seems to be emerging in respect of 
employees whose skills need to be kept sharp e.g. skilled tradespersons, 
actors.

(iii)	To Pay Wages.

The duty to pay for the work performed is the core of the employment 
contract. But an employer must also pay workers even if work cannot be 
provided for them. At common law there is no halfway house of 
"suspending" a worker without pay. The employer has the simple choice of 
keeping employees on the payroll or dismissing them. The common law 
position has been changed through provisions which allow an employer to 
apply for a stand-down clause to be inserted in an award. If this application 
is granted employees may be stood down without pay.

(iv)	To Pay Wages While the Worker is 
Sick.

A full-time or part-time worker or apprentice must be paid full wages if 
unable to work for a few days because of illness. This is only while the 
worker is employed. The employer can terminate the employment (with 
reasonable notice) and once the employment is ended the entitlement ceases. 
This duty is subject to workers' compensation legislation and the relevant 
industrial awards. The courts imply this duty as a term of the contract of 
employment.

(v)	To Give a Reference.

There is no common law obligation on an employer to give a reference or 
answer other questions about an employee. An employee cannot insist on 
receiving a reference although a brief work record may be provided for in 
some awards.

(vi)	To Observe Statutory Obligations.

Various statutes govern : health and safety at work, annual leave, sick leave, 
long service leave and payment for overtime.

(c)	Common Law Duties of Employees.

(i)	To Obey Lawful Commands.

If the employer issues an order within the general area of work which the 
employee has been hired to do then the employee must obey. The only 
limits to the duty to obey will be where the order involves the employee in 
illegal activity or would expose the employee to undue danger or it requires 
doing something outside the employee's job description. Thus an order to 
drive a vehicle where the driver is under age or does not have a licence is 
unlawful. The same is true where a person is employed as a typist and is 
ordered to do the personal shopping for the employer. In Ottoman Bank 
Ltd. v. Chakarian a bank employee was required by his employer to work 
in a branch in an overseas country where, because of his racial origin, his 
life would have been in danger. It was held that this was an unreasonable 
command and the dismissal of the employee for refusing it was wrongful.

Employees should check their awards if they have any doubts. It is 
important to be aware of the employer's right to give orders because the 
employer may dismiss the employee instantly (i.e. without giving notice) if 
the employee refuses to obey a lawful order. There is no requirement in law 
that he employer's orders must be reasonable; the orders can be completely 
unreasonable yet still be lawful as being within the contract.

(ii)	To Work in a Careful and Competent 
Manner.

When a person applies for a job the law takes the view that the person is 
saying to the prospective employer, "I can do the job, I've got the skills 
which the job requires." The law implies a term into the contract that the 
employee will take reasonable care and will perform the work in a 
competent manner. A failure to work with the appropriate standard of care 
and competence will expose the employee to instant dismissal.

A careless employee who causes damage to a third party will make the 
employer liable to compensate the injured party. The careless employee who 
causes financial loss to an employer is under a duty to indemnify the 
employer. In Lister v. Romford Ice & Cold Storage 3 a son 
employed as a lorry driver was sent with his father, a co-worker, to pick up 
some meat from an abattoir. While performing this task the son reversed the 
truck over his father. The father sued the employer claiming that it was 
responsible for its employee's negligence and was awarded Ł 1,600.00. 
This amount was paid by the employer's insurers who, possibly suspecting 
collusion between the father and son, brought an action against the son to 
recover the money paid out as compensation. The insurers won. The House 
of Lords decided unanimously that under the contract of employment the 
worker owed a duty of care to the employer to drive carefully so as not to 
create a situation where the employer would be vicariously liable.

This decision raised the threat of financial disaster for workers involved in 
such actions and there was much criticism of the court's decision in both 
England and Australia. Nevertheless, it remained the law in N.S.W. until 
1982 when the State government passed the Employees' Liability 
(Indemnification of Employer) Act, 1982. This Act specifically prohibited 
the type of action on the contract taken by the employer (or their insurer) in 
Lister v. Romford Ice. Parliament recognised that employers and insurance 
companies have ways of spreading their losses (e.g. by increasing the price 
of their services) that are unavailable to the individual worker.

However, insurance companies have been bypassing the intended effect of 
the legislation by seeking, in the employer's name, contributions from the 
negligent worker. Under section 5 of the Law Reform (Miscellaneous 
Provisions) Act, 1946 a person who is liable to compensate another for 
injury can seek a contribution towards the cost from anyone else whose 
negligence contributed to the injury. The Act allows for a contribution up to 
the full amount paid out in compensation. In 1985 the High Court 
4 confirmed that the 1982 Act had partially repealed the Law 
Reform (Miscellaneous Provisions) Act, 1946 in that the 1982 Act excluded 
recovery between concurrent wrongdoers. In other words, the employer is 
not entitled to claim a contribution or an indemnity for an employee's 
negligence in situations where the employer is vicariously liable.

The Employees' Liability Act, 1991 5protects the employee 
only where the damage is caused is personal injury or death and only where 
it is the result of negligence. Thus where personal injury or death results 
from an employee's serious and wilful misconduct the employee remains 
liable to indemnify the employer for any damages which the employer may 
have had to pay. Furthermore, where the employee's negligence causes 
property damage or loss of business, the employee remains liable to 
compensate the employer for the loss. Even stronger is the proposition that 
where the property damage or business loss is caused by the the employee's 
serious and wilful misconduct then the employee remains liable to 
compensate the employer for the loss.

(iii)	To Account to the Employer.

The worker must account to the employer for all money or property (e.g. 
tools, materials, fuel) received in the course of their employment. The 
employee cannot take things even if they are are "left over" nor should the 
employee "borrow" the employer's property. The employer's equipment 
cannot be used for the employee's profit. As a general rule anything the 
employee makes belongs to the employer. The employee must not make a 
secret profit from the job. Any profit belongs to the employer. There may be 
exceptions in some industries e.g. hotel staff can usually keep tips.


(iv)	To Keep Faithful Service.

A worker should not tell others any details of the employer's profits or 
losses, customers, special methods or techniques used, or any information 
about the business which might help a competitor. Such "inside" knowledge 
is distinguished from any skills, expertise or general knowledge that the 
individual may acquire or develop in their own work. It is legitimate to sell 
your own expertise but you should not profit from confidential information 
gained from your present or previous employer. Some contracts specifically 
prohibit disclosure even after the end of the employment. However, the 
courts are generally reluctant to enforce these clauses unless it appears fair 
and reasonable in all the circumstances and after having considered the 
interests of the employer, the worker and the public.

(v)	To Make Inventions Available to the 
Employer.

A worker who, in the course of employment, makes an invention or 
discovery, whether employed to undertake that particular activity or not, 
must account to the employer for it. An invention or discovery made outside 
the workplace and outside work hours is the property of the worker but the 
worker may have to prove that the research was done out of work hours.

(vi)	To Disclose Information to the 
Employer.

The worker is under no general duty to give information about himself or 
co-workers to the employer. However, someone employed in a supervisory 
capacity would be under an obligation to tell the employer about co-
workers' activities and any other matters affecting the business. There may 
be a duty to give information about criminal convictions or defaults on the 
part of other workers if a specific request is made by the employer. If asked 
directly about any criminal convictions, it is advisable to answer honestly 
(or refuse to answer at all) as honesty is a sign of good faith, required by 
the contract.

2.	Liability of 
Employer in Tort & Contract.

(a)	Tort.

In some circumstances the law of tort makes a third person responsible for 
the loss, damage or injury caused by someone else's wrongdoing or 
negligence. This is called vicarious liability and involves:-

(i)	A special kind of relationship between the wrongdoer and the 
person held responsible for the wrongful acts e.g. the employer-
employee relationship;

(ii)	A connection between the act of the wrongdoer and the special 
relationship e.g. the act was done in the course of employment, or 
within the scope of the employee's authority and the victim was 
injured by the particular wrongful act or omission.

There are three main relationships giving rise to vicarious liability:-

(i)	Between master and servant (i.e. employer and employee);

(ii)	Between principal and agent;

(iii)	Between partners.

A famous case on this area of the law is Deaton P/L v. Flew 
6. In that case Opal Ruby Pearl Barlow worked serving beer 
in the saloon bar of the defendant's hotel at Manly. A drunk man caused a 
disturbance in the bar and when Barlow asked him to leave, he called her 
"foul names reflecting on her chastity and her parentage" and lent over the 
bar and struck her on the side of the face. Barlow threw beer in his face but 
unfortunately the glass slipped from her hand and removed his eye. The 
High Court held that her employer was not liable as the terms and 
conditions of her employment did not include keeping order in the bar and 
she was therefore not acting in the course of her employment. This together 
with the court's decision that Barlow's action was not self-defence, but was 
a "retort", meant that Barlow was solely liable for the injury her actions 
caused.

The requirement for a special relationship between the wrongdoer and the 
person held responsible means that an employer is not vicariously liable for 
the acts of independent contractors, even if they are working at the 
employer's place of business. It is increasingly admitted by judges and 
lawyers that the point of vicarious liability is to distribute losses more fairly 
and evenly across the community. An employer is usually covered by 
insurance and insurance companies can spread their losses by raising their 
premiums. This cost is in turn covered by the businesses raising the price of 
their goods and services.

Problems have arisen in determining just when a worker is acting in the 
course of employment. The employer is clearly liable when the worker is 
carrying out the duties which he was employed to do. The employer is not 
liable when the worker was off on a "frolic" of his own. Where a petrol 
tanker driver lit a cigarette and threw away the lighted match while 
supervising the pouring of petrol into an underground tank at a petrol 
station, the employer was held vicariously liable for the resulting damage 
because the supervision of such delivery was part of the employee's duties. 
That the driver's cigarette was for his own satisfaction and not for the 
benefit of the employer, does not preclude vicarious liability in this type of 
situation 7.

The employer is also responsible where the worker's actions amount to an 
unauthorised manner of performing an authorised act. The particular act 
causing the damage need not itself be authorised, but it must belong to a 
class or type of act authorised by the employer, or be of a similar type of act 
to the authorised acts. By looking at the circumstances of the case, the 
custom and practice of the industry and the terms and conditions of the 
employment contract, the courts determine whether the action was within 
the worker's duties. If it was, the employer is liable even though the action 
may have been done in a negligent, dangerous or unlawful manner.

In an emergency, it may be implied that workers are authorised to take 
action which is outside their normal employment duties. However, such 
action must demonstrably be done to protect the employer's interests and 
must not be excessive in the circumstances. In Poland v. John Parr & Sons 
8 a carter called Hall had finished work and was walking 
home when he say a boy whom he thought was pilfering sugar from a bag 
on Hall's employer's wagon. Hall hit the boy who fell and injured his foot. 
The employer was held liable because of an implied authorisation for Hall to 
take action. The court held that if Hall's act had been excessive (e.g. if he 
had shot the boy) there would have been no implied authorization and 
therefore no vicarious liability.

(b)	Contract.

The employer is liable to third parties in contract for the acts of his 
employees where the employee is acting as an agent. Where an agent 
contracts on behalf of his principal with a third party and discloses to the 
third party that he is acting as an agent, he will not be personally liable on 
the contract, even if he has not disclosed the name of his principal, unless:-

(i)	he has personally agreed to be liable;

(ii)	he is made liable by trade or custom;

(iii)	he executes a deed or bill  of exchange in his own name;

(iv)	he has exceeded his actual authority or apparent authority;

(v)	the principal is not existent.

Where the agent fails to disclose that he is contracting on behalf of a 
principal the third party may sue the agent personally or if he becomes 
aware of the existence of the principal, he may choose to sue the principal 
instead.

3.	Ending 
Employment.

(a)	Generally.

The contract of employment is personal and cannot be assigned to another 
party. In theory, the contract ends upon the death of a human party or the 
liquidation of a corporate one because rights and duties cannot be assigned. 
This means that employees cannot be "sold" along with plant and 
equipment. Thus a company which buys a business or takes over another 
company is under no obligation to employ workers because their contracts 
have ended.

(b)	Giving Notice.

The most usual method of ending a contract of employment is by the 
employer or the employee giving notice. Provided that the employment is 
terminated in accordance with the contract it may be done for any reason or 
for none. There is no general common law obligation on an employer to 
give reasons for dismissal.

Most awards specify the required period of notice. It is normal for full-time 
workers to be entitled to (and obliged to give) at least one week's notice but 
some awards provide for periods of as little as two days. Part-time workers 
are usually entitled to the same period of notice as full-time workers. Casual 
workers can usually be dismissed with one hour's notice.

If the award and the contract do not mention notice, the courts imply a 
condition that the period of notice must be reasonable in all the 
circumstances. What is reasonable will depend on a number of factors, 
including the status of the worker, the custom and practice in the particular 
industry and the period for which wages are normally paid. In some jobs, 
such as executive positions, notice may involve a period of up to a few 
months.

An employer can dismiss a worker on the spot, without notice, if the 
worker is paid wages for a period equivalent to the notice period. If an 
employer dismisses a worker without giving the required notice, the 
termination is not invalid, but the worker may sue. The worker however 
will only receive damages equivalent to the wages owed, and no more.

There is no legal requirement that employer and employee must be bound to 
the same period of notice. The parties are quite free to negotiate their own 
terms provided they do not breach a statute or an award. In practice, the 
same period of notice is required of employee and employer, particularly 
where both parties are bound by an award.

(c)	When the Job Cannot be Done.

The contract of employment may also be terminated through the operation of 
the contractual doctrine of frustration. It applies where something happens 
that was not forseen by the parties when the agreement was made. The 
events must not have been the fault of either party and must in some way 
destroy the aim or subject matter of the contract. In these circumstances, the 
courts hold that the contract no longer exists. An obvious example is where 
the worker dies.

The situation is more complicated where the the worker is unable to work 
for a long period because of illness or injury. It has been held 
9 that the community standards, as reflected in worker's 
compensation legislation, together with industrial awards and sick leave 
benefits, work against the application of the doctrine of frustration in the 
event of a worker's illness.

To constitute frustration of the contract, the worker's incapacity must make 
the contract of employment impossible, as distinct from disrupting its 
performance. An employer inconvenienced by a worker's illness or injury, 
could (subject to any workers' compensation) terminate the employment by 
notice.

An employer may also be inconvenienced when an employee is called upon 
for military service or when the employee is sentenced to a term of 
imprisonment. Rather than arguing the possible application of the doctrine 
of frustration it is suggested that the most sensible course of action is for the 
employer to exercise the right to terminate by giving the proper period of 
notice.

On the other hand an employee will be inconvenienced when the work-place 
is closed because of fire or flood or other natural disaster or when no work 
is available because of industrial action by other sections of the workforce. 
In these situations it is likely that an employer bound by an award will seek 
a stand-down order. If it is a situation where there is no award then the 
employer has no choice but to pay the employees or dismiss them with 
proper notice.

(d)	Misconduct.

Serious and wilful misconduct by a worker may lead to summary dismissal. 
Summary dismissal takes place when an employer terminates the 
employment without notice. Such misconduct is viewed as a "fundamental 
breach" of the worker's obligations under the contract. Fundamental breach 
is a clear intention by the worker not to be bound by the contract.

In contract law generally, fundamental breach gives the innocent party the 
right to terminate the contract or to affirm it by communicating to the other 
party their intention to treat the contract as continuing. In either case they 
can sue for any losses they may have suffered. However in employment 
law, the tendency is to regard the breach as automatically terminating the 
contract. Note that he innocent party has a duty to mitigate or lessen their 
losses by doing everything reasonably possible to decrease their financial 
loss.

In the case of a breach of a contractual condition which is not significant 
enough to constitute a fundamental breach, no automatic termination occurs. 
The innocent party cannot end the employment relationship on that basis, 
although they may sue for any losses suffered as a consequence of the 
minor breach.

What amounts to serious and wilful misconduct is an uncertain area of the 
law. The following are some examples of behaviour which will probably 
amount to misconduct justifying instant dismissal: conduct of a nature 
sufficient to indicate an intention not to be bound by the contract; gross 
insubordination or insolence; drunkeness at work which affects the 
performance of duties; gross neglect of duties; chronic absenteeism; 
incompetence reflecting on the worker's ability to carry out her or his duties; 
wilful disobedience of a lawful command; objectionable, abusive or obscene 
language in circumstances where it is inconsistent with the worker's duties 
(e.g. salesperson abusing customers); or convictions of a crime only where 
it reflects on the worker's ability to carry out duties (e.g. a bank teller could 
be dismissed if convicted of fraud).

Dismissal for misconduct must be done as soon as the employer learns of 
the objectionable conduct. Upon dismissal, a worker is entitled to all wages 
and leave payments up to the date of the dismissal. The employer should be 
careful no to turn a blind eye to certain chronic activity such as lateness, 
finishing work earlier than the time prescribed in the contract or removing 
bits and pieces from the work-place. If the employer turns a blind eye it 
may, as a matter of law, be very difficult to suddenly argue that the 
chronically late employee is in breach. The law would respond by saying, if 
effect, that the employer has sat on his hands too long and has waived the 
right to dismiss for misconduct.

In practice it is better for all concerned if the workplace has a jointly agreed 
grievance procedure part of which would allow the giving of a warning 
(preferably in writing) on the first occasion of behaviour such as lateness or 
insubordination. The procedure would then allow for a second and, 
eventually, a final warning. After that, any repetition of the behaviour 
would result in instant dismissal. In this way all concerned will know where 
they stand.

(e)	Remedies for Unlawful Termination.

An order for specific performance is not available under a contract of 
employment. The court will not make people work with each other if they 
do not want to. However, a worker who has been summarily dismissed 
without a lawful basis, or who has not been given the required notice, can 
sue the employer and seek damages. Damages will usually be confined to an 
amount equivalent to wages for the period of notice.

The State Industrial Commission will, in some circumstances, order the 
reinstatement of a worker who has been unjustly dismissed. In order to 
have standing before the Commission an application for reinstatement must 
be made on behalf of a sacked worker by a trade union registered under the 
Industrial Arbitration Act. Reinstatement is more likely to be ordered when 
the worker has been in the job for many years or when the employer acted 
arbitrarily and without giving the worker previous warnings about 
dissatisfaction with their conduct.

Much of this area of the law has been changed by the unfair dismissal laws 
passed by the the State and Federal governments.

3.	Statutes Modifying the 
Employer/Employee Relationship.

(a)	Workers Compensation.

(i)	Generally.

The Workers Compensation Act, 1987 introduced a system of 
compensation popularly known as Workcover. The system is intended to 
emphasise rehabilitation of injured workers and to speed up the resolution 
of disputed claims. This Act applies to all injuries occurring on or after 1st 
July, 1987. For injuries suffered before that date, certain parts of the 
Workers Compensation Act, 1926 apply.

Employees of the Commonwealth government are not covered by the 
N.S.W. Workers Compensation Act. There is separate legislation, the 
Commonwealth Employees Rehabilitation and Compensation Act, 1988, for 
them which established a Commonwealth authority called Comcare. Some 
exceptions are Telecom and Australia Post.

All employers must be insured for workers compensation. When a worker 
makes a claim for compensation, the employer must forward it to the 
insurer. If there is a dispute, the insurer will step in and conduct the matter 
on behalf of the employer. If the employer is uninsured, the worker may 
make a claim under the Uninsured Liability and Indemnity Scheme. If the 
claim is met it will be paid out by the Workcover Authority which can then 
recover the amount from the uninsured employer.

(ii)	Eligibility.

Any worker who has suffered an injury in the course of employment may 
be entitled to compensation. A worker will not be entitled to compensation if 
an injury is solely caused by their own serious or wilful misconduct. In 
practice it is difficult to demonstrate that the action was wilful or deliberate. 
This exclusion does not apply if the injury results in serious and permanent 
disablement or in death. No compensation will be paid if the injury is 
intentionally self-inflicted.

There is no minimum age for receiving compensation. If a worker becomes 
entitled to weekly compensation before the age of 65 for men or 60 women 
weekly compensation is only paid until 66 for men or 61 for women. If a 
worker becomes entitled to weekly compensation after becoming eligible for 
the age pension compensation is only paid for one year after the date of 
injury.

A worker must have his home in Australia to be eligible for compensation. 
This restriction may not apply if the incapacity for work is permanent. 
People who are in Australia under a visa, or illegally, are entitled to workers 
compensation on the same basis as any other worker.

Compensation is payable only to people who are classified as workers. A 
worker can be full or part-time. Most casual workers will be covered. 
Workers may be deemed employees. They include: independent contractors 
who do not carry on a business or trade and who perform work themselves 
without employing others; sellers, canvasser, collectors paid by commission 
who are not engaged in carrying on a business on their own account; 
voluntary firefighters, ambulance workers, caddies, shearers, cooks, 
boxers, timber-getters, jockeys, entertainers and ministers of religion. There 
are some exemptions e.g. an officer of an association who does work for 
the association outside his or her usual working hours and is paid less than 
$ 700.00 per year for the work done; or a person employed from time to 
time, each time for not more than 5 days, and who is employed for other 
than the employer's trade or business e.g. a babysitter.

(iii)	Injury.

The term "injury", for the purposes of workers compensation, also refers to 
death. It includes damage to the body which may be internal or external. It 
includes disease contracted by the worker in the course of employment 
whether at the work place or not when the employment can be shown to be 
a contributing factor. Injury includes aggravation, acceleration, exacerbation 
of any disease to which the employment was a contributing factor.

Most injuries result from a specific incident and the date of injury is the date 
that incident occurred. Where a worker was injured over a period of time by 
gradual onset of a disease or a condition, the date at which the worker 
reaches incapacity or dies is the date of injury for the purposes of the law.

"Arising out of or in the course of employment" covers an injury caused by 
or connected with work. Compensation is also payable for injuries 
occurring in circumstances related to the job when a worker is injured while 
doing something which an employer could reasonably have expected or 
authorised the worker to do. For example, a worker injured during a lunch 
break, while eating or resting, or while participating in recreational activities 
provided by an employer will be entitled to compensation.

After 31st March, 1990 compensation is only payable in relation to a 
journey between home and the work place where the risk of injury is 
"materially increased" for a reason connected with the worker's 
employment. If the injury was caused partly or wholly by the fault of the 
worker then no compensation is payable.

(iv)	Compensation Benefits.

A claim for compensation should be submitted within 6 months of the date 
of injury. The worker who has suffered an injury must obtain a claim form 
from the employer and complete it. The claim form and a medical certificate 
from the worker's treating doctor is then sent by the employer to the 
insurer. The insurer may also require the worker to undergo a medical 
examination.

Compensation is paid for: time loss due to work related injury; the 
permanent loss or loss of use of a part of the body or faculties; medical, 
hospital , ambulance, rehabilitation and some travel expenses; damage to 
clothing and to artificial aids such as glasses, false teeth or limbs; death of a 
person (paid to a worker's dependents); funeral expenses of people who die 
and leave no dependents; and pain and suffering in relation to injuries after 
30th June, 1987.

Where the worker is totally incapacitated, compensation is paid for the first 
26 weeks at the worker's current weekly wage rate. This is the wage 
excluding overtime or allowances. After the first 26 weeks, compensation is 
paid at a set weekly rate. There is also a weekly allowance for a dependent 
spouse and children.

Where the worker is partially incapacitated, the amount of weekly 
compensation will be severely limited where they do not find alternative 
employment or attend rehabilitation or training. This is because partial 
incapacity benefits are calculated by reference to basic award rates rather 
than comparable employees. 

In limited circumstances it is possible for the insurer to commute the liability 
to pay weekly compensation to a worker. This is done by paying the worker 
a single lump sum but it can only be done where either the worker is at least 
55 years old or with the approval of the Workcover Authority for a worker 
of any age.

(v)	Common Law Claims for Damages.

The right to claim damages from an employer is severely restricted in cases 
of injury after the 1st July, 1987. Prior to that date, damages awards were 
made up of two basic elements: economic loss (wages and other expenses); 
and non-economic loss (pain and suffering, loss of enjoyment of life). The 
ability to obtain lump sum damages for these two elements is now restricted 
by the imposition of thresholds. Damages for economic loss may only be 
awarded by the Court if either the amount of compensation payable is more 
than 33 % of the maximum or the case is so serious that the Court awards 
more than $ 67,305.70 for non-economic loss.

If a worker sues some other person (e.g. an occupier) for damages for a 
workplace injury, the damages payable are reduced substantially, depending 
on the extent to which the employer is also responsible.

If a worker's own negligence contributed to his or her injuries, the amount 
of any damages awarded will be reduced proportionally by the extent of the 
contributory negligence. Damages may be reduced even in the case of an 
action based on breach of a statutory duty.

(vi)	Employer's Obligations.

Failure of an employer to comply with any obligations is an offence and 
may lead to the imposition of a fine. An employer must produce the workers 
compensation insurance policy to the Workcover Authority on request. The 
policy must be kept for at least seven yeas and after that until there are no 
workers covered by it.

An insurer is entitled to claim from large employers (more than 20 workers) 
the first $ 500.00 of each compensation claim which is paid. An insurer 
may reach an agreement with a small employer that an excess of some 
amount, not greater than $ 500.00, be paid.

(b)	Health & Safety.

There are a number of Acts and Regulations imposing minimum standards 
for safety in the workplace, particularly regarding the fencing-off of 
dangerous machinery, safe practices on building sites, basic sanitation and 
other occupational health requirements. The most important for N.S.W. 
workers are the Factories, Shops and Industries Act, 1962 and the 
Construction Safety Act, 1912.

There are significant fines for breaching the provisions of these Acts. A 
worker who is injured as a result of the employer's breach of these statutory 
duties has a common law action for the breach of a statutory duty. The 
cause of action is independent of, and in addition to, any action for breach 
of the common law duty of care that the employer owes the worker.

In addition to the Acts setting out detailed specification standards, the 
N.S.W. Occupational Health and Safety Act, 1983 imposes a performance 
standard (the taking of reasonable care for health and safety at work) on 
employers, contractors, occupiers, manufacturers and employees. Fines for 
failing to comply with this standard are high, with a possible maximum 
(except in the case of employees) of $ 250,000.00 for a convicted 
corporation.

The Occupational Health and Safety Act also provides for employee 
participation in ensuring health and safety through joint management-labour 
safety committees. If the majority of the employees in a work place of 
twenty or more request it, a safety committee must be established and 
employee delegates must hold at least half the positions on the committee.

(c)	Equal Opportunity.

There are four Acts covering there areas of equal opportunity and anti-
discrimination in N.S.W.. They are the Anti-Discrimination Act, 1977 
(N.S.W.), the Race Discrimination Act, 1976 (Cwth), the Sex 
Discrimination Act, 1984 (Cwth) and the Human Rights and Equal 
Opportunity Commission Act, 1987 (Cwth).

Under the Anti-Discrimination Act, 1977 it is illegal to discriminate on the 
grounds of race, sex, marital status, physical impairment, intellectual 
impairment or homosexuality. Discrimination in employment means 
denying a person equal treatment in the area of work for reasons other than 
those that relate directly to the job. The Act covers all stages of employment 
including: the way the job is advertised; the way interviews are conducted; 
how hiring decisions are made; wages, work conditions and terms of 
employment; promotion, transfer, training opportunities and other benefits 
associated with the employment; and dismissals.

Sexual harassment is a form of sex discrimination and is illegal under the 
the N.S.W. Anti-Discrimination Act, 1977 and Commonwealth Sex 
Discrimination Act, 1984. Sexual harassment is conduct that is unwelcome 
and uninvited. It can take the form of smutty jokes, taunting someone with 
constant talk about sex or asking about their sexual activities, staring and 
leering or actual physical contact. Repeated propositioning or the requesting 
of sex in return for a job or promotion are also regarded as sexual 
harassment.

Both women and men can be sexually harassed. A person can be harassed 
by an individual or a group of people at work. The harasser can be an 
employer, a supervisor, a co-worker or a customer.

The Anti-Discrimination Board is part of the N.S.W. government and 
handles complaints under the N.S.W. law. The Human Rights and Equal 
Opportunity Commission is a federal agency that handles complaints under 
Commonwealth legislation.

(d)	Industrial Disputes.

Regulation of industrial matters and disputes in N.S.W. is governed by 
both the Industrial Arbitration Act, 1940 (N.S.W.) and the Conciliation & 
Arbitration Act (Cwth). Both the State and Commonwealth legislation have 
established tribunals for the purpose of dealing with industrial matters. The 
tribunals have a twofold function: the arbitration of industrial disputes and 
the making of industrial awards.

At the federal level the Conciliation and Arbitration Commission has power 
to conciliate and arbitrate in interstate industrial disputes. An award made by 
the Commission is binding on the people or bodies who are a party to the 
dispute. Where a party to the dispute is a trade union registered under the 
Act, then all members are bound for the period of their membership.

The N.S.W. Industrial Commission has power to make awards of wages 
and conditions which apply throughout N.S.W. to all persons covered by 
the award. Its awards and rulings will not apply to a section of industry 
covered by a Commonwealth award. This is because s. 109 of the 
Constitution makes any State law which is inconsistent with a 
Commonwealth law invalid to the extent of the difference.

The Industrial Arbitration Act is confined to employees i.e. those working 
under contracts of employment. The Act deems many people who work 
under other types of contracts to be employees for the purpose of the Act 
and also for other employment related laws such as the Long Service Leave 
Act and Annual Holidays Act. Deemed employees include some people who 
transport and deliver bread or milk; lease hairdressing premises; carry out 
maintenance and repair work on buildings; and do cleaning work10.

(e)	Industrial Awards.

Australia has an interlocking system of Federal and State industrial 
tribunals. These tribunals make awards and give rulings on individual 
disputes. A person who works in N.S.W. could be covered by a N.S.W. 
award, a Commonwealth award or no award. Ninety per cent of Australian 
workers are covered by either a State or Federal award.

Generally, an award classifies all the jobs in a particular industry and then 
specifies the worker's rights in each of those classifications. Awards rarely 
impose obligations on workers. They set detailed minimum standards for 
pay and work conditions and they confer benefits such as sick leave and 
maternity leave. Employers are bound by law to comply with these awards. 
Provisions vary between awards but commonly they deal with: 
classification and minimum rates of pay; information about pay; hours to be 
worked; extra payments which should be made in addition to  the award 
wage; and leave entitlements.

The Occupational Superannuation Standards Act, 1987 (Cwth) gives the 
Federal Industrial Tribunal jurisdiction over occupational superannuation 
awards and agreements. If staff are covered by an award they are entitled to 
a percentage productivity contribution to superannuation from the employer.

(f)	Payment of Wages.

Where a worker's wages are fixed by an award or industrial agreement 
made under the Industrial Arbitration Act the employer must pay the full 
amount of wages in cash 11. With the exception of income tax deductions and 
garnishee orders made by courts the only deductions that may be made are 
those authorised in the award or agreement. 

Where the worker is covered by an award the employer must give the 
worker certain information about the pay including date of payment, the 
worker's classification, the period for which payment is made, the hours 
worked and the amounts of pay with any bonuses or deductions12. All 
employer operating under industrial awards or agreements must keep time 
and pay sheets for all workers at their business premises. They must display 
a copy of any award which applies to their workplace13.

People who work under a contract of employment but who are not covered 
by an award or industrial agreement must also generally be paid the full 
amount of their wages except for a few limited, allowable deductions. 
Payment may be in cash, by postal order, postal notes or by cheque14.

Any person dealing with a contractor in any situation where that contractor 
is liable to pay wages, must obtain a written statement from the contractor 
that no wages are due and owing at the time when the person pays the 
contractor. If this assurance is not obtained, the person will be liable for any 
unpaid wages of the contractor's workers15.If employers owe money to 
workers who have left their employment and cannot be found they may pay 
that money to the Department of Industrial Relations who holds it for the 
benefit of the employee. Payment in this way completely discharges the 
employer from liability for those wages16.

Recovery actions for wages payable under a N.S.W. award may be 
commenced before an Industrial Magistrate17. Action must be started in a 
Local Court not earlier than 12 months from the time the wages were due. 
Were wages are paid under a Federal award, recovery actions may be taken 
in any Local Court, the District Court or in the Industrial Division of the 
Federal Court18. Wages may be recovered for a period of 6 years prior to 
action being taken. Action may only be taken by a worker who is a member 
of a Federally registered union, by a union on behalf of a member or the 
Department of Employment and Industrial Relations.

A worker may also recover unpaid wages under the common law by suing 
for breach of contract. The unpaid wages are claimed as a liquidated debt. 
The appropriate court will depend on the amount claimed.

(g)	Harsh or Unfair Work 
Arrangements.

The N.S.W. Industrial Commission has the power under section 88F of the 
Industrial Arbitration Act to rule invalid in whole or in part, or to vary in 
whole or in part, an; contract or arrangement under which a person 
performs work in any industry, if it is satisfied that the arrangement is 
unfair or harsh or unconscionable; is against public interest; provides or has 
provided a total payment less than that of other employees doing the same 
work; or was designed to or does avoid an award or an industrial 
agreement.

The section gives the Commission wide powers to order payment or 
repayment to employees and has been used extensively to set aside unfair 
work arrangements.

(h)	Enterprise Bargaining.

Both State 19 and Commonwealth 20 legislation 
has been amended to give greater emphasis to enterprise bargaining, at the 
same time, maintaining a supervisory role for the traditional control 
tribunals.

(i)	Long Service Leave Act, 1955 (N.S.W.).

This Act provides that every worker is entitled to two months long service 
leave on ordinary pay after the first 10 years of employment. Every five 
years after that, the worker is entitled to one month's leave (s. 4). A 
month's leave means four and one-third weeks. Where any public holiday 
occurs during any period of long service leave taken by a worker and the 
worker would normally be paid for that day, the period of leave is increased 
by one day for each public holiday.

The Act applies to all workers in N.S.W. except those covered by a 
Commonwealth long service leave award, those covered by an award or 
industrial agreement which provides more favourable long service 
entitlements or those workers entitled to long service leave under any other 
Act (s. 5). 

Long service leave is available to people who work on a permanent, part-
time, casual "or any other basis", so long as they satisfy the "continuous 
service" requirement. Employment is not to be considered interrupted if the 
breaks were caused by: the absence of the worker under the terms of the 
contract; absence because of illness or injury; the employer attempting to 
avoid any obligation under the Act; an industrial dispute; slackness of trade; 
the employer granting leave; or where the worker returns to work within 
two months of leaving (s. 4(11)).

The period of interruption is not taken into account in calculating the period 
of service. The period of employment is not regarded as ended or 
interrupted because of the transfer of the business (or part of it) to another 
company or employer. After the transfer of business, the new owner is 
liable for all leave entitlements that fall due after that date (s. 4(11)(c)).

Leave should be taken as soon as practicable after it falls due, although it 
may be postponed if both the employer and the worker agree, in two, three 
or four separate periods depending upon the amount of leave due. In all 
situations, the employer must give each worker at least one month's notice 
of the date at which it is proposed the leave shall be given and taken.

Payment in lieu of leave is prohibited (s. 4(8)). Upon termination of 
employment, the worker is entitled to the value of any long service leave 
owing for the period of employment since the last long service leave 
entitlement, calculated on the rate of two months for 10 years service. If the 
worker has had at least five years service as an adult then he is entitled to a 
proportionate amount of leave on the basis of two months for every 10 
years. This only applies if the worker is retrenched or leaves because of 
illness or other pressing necessity. It does not cover voluntary resignation 
or dismissal for serious and wilful misconduct(s. 4(2)(a)(iii)).

The Act prohibits parties contracting out of its provisions and makes void 
any part of an agreement which excludes or varies the Act (s. 7).

(j)	Annual Holidays Act, 1944 (N.S.W.).

This Act requires the employer to give and the worker to take four weeks 
paid annual holiday. The entitlement arises on the anniversary of starting 
work. The worker must be paid in advance and payment is the worker's 
ordinary pay (s. 3). The Act defines ordinary pay in detail and it includes 
certain bonuses or incentive payments (such as commissions), some shift 
allowances and weekend penalty rates and the cash value of board and 
lodging, if this is usually provided. Industrial awards often contain a 
provision for annual holiday pay to be paid at a higher than normal rate, 
normally an extra 17.5 %.

The Act applies to all workers in N.S.W. except those working under an 
award, agreement or contract which gives workers more favourable benefits 
(s. 5). Annual holidays can be taken as one period or in up to four periods if 
the worker and employer agree. They must be taken within six months of 
their falling due (s. 3(4)). A worker cannot contract out of the entitlement to 
paid annual holidays (s. 8). As a general rule, payment in lieu of any or all 
of an employee's holidays is prohibited (s. 3(5)). If however, the worker 
has become entitled to annual holidays, but the employment is ended before 
they are taken, the employer must pay the worker for the untaken leave. If a 
worker has worked less than one year when a job ends the worker is 
entitled to 1/12th of the ordinary pay for the period worked (s. 4(3)).

(k)	Maternity Leave.

Part XIV of the Industrial Arbitration Act provides maternity leave 
entitlements for women employed in industry in N.S.W.. It largely codifies 
the maternity leave benefits awarded to Federal award employees by the 
Australian Conciliation and Arbitration Act, 1979 as a result of a test case 
run by the ACTU. Maternity leave entitlements are generally dealt with in 
awards.


1	St. Luke Ch. 10 verse 7.
2	Stevens v. Broadribb Sawmilling Co. Pty. Ltd (1986) 60 ALJR 194 at 198.
3	[1957] A.C. 555.
4	McGrath v. Fairfield MC (1985) 59 ALR 18.
5	Formerly Employees' Liability (Indemnification of Employer) Act made this provision
6	(1949) 79 CLR 370.
7	Century Insurance Company Ltd. v. Northern Ireland Road Transport Board (1942) AC 509 (HL).
8	[1927] 1 KB 236.
9	Finch v. Sayers [1976] 2 NSWLR 540.
10	Ss. 88B, 88E and Regulations 91A to 91E Industrial Arbitration Act, 1940.
11	Section 92(1)(a) Industrial Arbitration Act, 1940.
12	Section 95A Industrial Arbitration Act, 1940.
13	Section 96 Industrial Arbitration Act, 1940.
14	Truck Act, 1900.
15	Section 92(5) Industrial Arbitration Act, 1940.
16	Section 92(6) Industrial Arbitration Act, 1940.
17	Section 92 Industrial Arbitration Act, 1940.
18	Section 119 Conciliation & Arbitration Act.
19	Industrial Relations (Enterprise Agreements) Amendment Act, 1990.
20	Section 115 Industrial Relations Act, 1988.

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Dan O'Keefe
danok@ozemail.com.au P.O. Box 1127, DUBBO, N.S.W., Australia, 2830
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