The line between lawful and unlawful unpaid work is not always clear.

Many companies are contacted by people offering to work on a voluntary basis.  It is often pitched as a “win-win” because the person is willing to work for free in exchange for experience and contacts, particularly in high demand industries such as sports, entertainment, media or fashion.

Unpaid work remains lawful provided the person is a genuine volunteer and not an employee. However, an error of judgment can have serious consequences.

What should a responsible employer do?  When is it OK to say yes and when do they need to say no?

In the last few years, we have seen an increasing number of cases in which employers have been criticised, investigated, sued and (in some instances) fined for relying on volunteering or training arrangements to defend claims that they have not provided the legally required employment benefits. For example:

  • A media company that agreed to provide unpaid work experience to two people (at their request) was fined. Although the volunteering was found to be legitimate at the outset, it continued for over 6 months and resulted in the two workers essentially being treated as part of the regular workforce.  The Court found that the relationship had changed; meaning the workers were employees and were entitled to be paid.
  • Another media company was fined after recruiting workers to perform unpaid internship positions instead of employing them as employees. The Court ordered penalties for breaching the relevant award.
  • At least one company has entered into an enforceable undertaking with the regulator after the Fair Work Ombudsman found that its “volunteers” were actually employees.
  • A farmworker claimed employment benefits under the applicable award. The company successfully resisted the claim by demonstrating that it had always been a volunteering arrangement, and that she had applied for and accepted the role on this basis.
  • A fashion start-up and its director were fined for engaging a graphic designer as an unpaid “intern” despite having completed a university degree and working 2 days per week for almost 6 months.

Unfortunately, the line between genuine volunteering and exploitative arrangements remains controversial – with brand risks for any company that is accused of exploiting inexperienced workers.

Recent headlines have alleged that paying reduced wages to trainees can be an exploitative way of cutting costs.

In the sporting arena, a young footballer provided with an unpaid trial has sued his club saying “You don’t trial for over three months, that is ridiculous”. The club is defending the claim on the basis that the unpaid work was a genuine volunteering opportunity.

A different football club also experienced an online backlash after advertising for a nine month ‘voluntary’ assistant role. In that case, although there was some suggestion that the ad wording hadn’t reflected the intention of the role, the CEO also made the point that many full-time club staff had started out as interns.

This raises a valid question: Is volunteering becoming too high risk?

Although each case is different, for employers wanting to support people seeking experience in their chosen field, there are a number of key questions that are useful to consider:

  • If the placement is to provide work experience or learning, what training, learning experience or other benefits will the worker receive? If it is a longer placement, is this because they will spend some time in different teams or be exposed to different kinds of work?  Are they shadowing someone on a project?
  • If the placement is to provide a ‘trial’ period, how long is reasonable to demonstrate the skills required for the job? What length is appropriate? (Workers and regulators may be less likely to dispute the legitimacy of a shorter placement.)
  • How does the worker fit into the business? The risk of a claim increases if the volunteer is essentially acting as free labour as part of a paid workforce, filling a role that would otherwise be given to a paid employee.
  • What additional administrative and legal protections are needed? There are a number of duties – safe work arrangements, for example – that employers owe to volunteers as well as employees and contractors.  When dealing with staff who do not have industry experience, additional safeguards should also be considered.
  • What are the terms of the volunteering arrangement? Setting out the details in writing can clarify the boundaries, ensure everyone is on the same page about what is being proposed and agreed, and help avoid misunderstandings.

Everyone has an interest in ensuring inexperienced workers are protected from exploitation, while genuine volunteer opportunities are provided for those who want them.  Despite the trend of increasing claims and the complex regulatory framework, the good news is that the law does not block legitimate volunteering.  With careful management, this can still be a “win-win” scenario that provides benefits for both a person seeking to volunteer and a company that wants to help them out.


Subscribe to receive the next Workplace Law & Strategy blog direct to your inbox.

Seyfarth is proud to announce the promotion of Sarah Goodhew to partner in its Sydney office. Sarah joined Seyfarth in 2015 when it established its Workplace Health and Safety practice.

Australia Managing Partner, Darren Perry, said “We are excited to have Sarah become the second lawyer to be promoted to partner since we opened our Australian practice. Having worked in workplace health and safety law for nearly 15 years, she has developed extensive knowledge in this field. Since joining Seyfarth she has become known for her practical, realistic and commercially sound advice to clients.”

Sarah is an accomplished workplace health and safety lawyer. During her career she has worked with a wide variety of clients, notably in the resources, retail and transport sectors. Sarah regularly responds to regulatory investigations, prepares and defends workplace health and safety prosecutions, and represents clients at coronial inquests.

Sarah is currently on maternity leave and will continue to work closely with Paul Cutrone on her return later in the year.

Subscribe to receive the next Workplace Law & Strategy blog direct to your inbox.

Care or career – it doesn’t have to be a choice

Do you know which one of your nearest eight colleagues provides unpaid care for a loved one? The number of working adults who juggle unpaid carer’s responsibilities is high, hidden, and growing. Most working Aussies will have unpaid care responsibilities intrude regularly throughout their careers. Many won’t feel comfortable exercising their right to request flexible working arrangements for fear of ‘flexism’. But without appropriate support to balance work and family responsibilities, carers’ own wellbeing and productivity can suffer and in the worst case, they may exit the workforce completely.

As the demands on working carers increase, employers who create a culture of care, where the challenges for working carers are understood and flexible working arrangements are mainstream, will be best-placed to attract and retain diverse talent.

The costs of care are significant for carers and employers

The number and age range of employees with care responsibilities is expanding. Later retirement means many experienced workers also care for elderly family members. The trend towards having children later in life has created a ‘sandwich generation’ with responsibilities to care for both their young children and elderly parents, while the ‘club sandwich’ generation support parents, adult children and grandchildren! The extraordinary cost of care and shift towards at-home childcare and elder care raises the intensity of direct care responsibilities and remote ‘care management’.

The personal costs of juggling care and career are profound. The challenges faced by working carers can result in absenteeism, or presenteeism with a significant ‘distraction factor’. Unexpected, recurring or enduring disruptions to work can undermine career goals, and the burden of care responsibilities can cause severe stress and poor mental health outcomes. Many carers reduce their hours, forego career opportunities and some even leave the workforce prematurely. Most working carers are aged between 45 and 64 years old, and 35% are managers and professionals. The costs to businesses from avoidable loss of talent, experience and institutional knowledge, plus productivity and turnover costs, are too high to ignore.

Aim to think flexibly about providing flexibility

There’s a massive opportunity for employers to position themselves as employers of choice by developing an understanding of the challenges faced by carers in their workforce, and reconsidering how to facilitate flexibility to support working carers. While many employers excel at providing flexibility for carers at particular, predictable points in time (the most obvious example being for new parents), a different mix of flexible working arrangements and support mechanisms are needed to support employees whose care responsibilities can be unexpected, episodic and enduring.

National Carers Week marks the perfect opportunity to kick off the conversation. The hardest part is getting started, but the five-step roadmap below will point you in the right direction:

  1. Conduct a care census. Build an awareness and understanding of the nature and extent of the challenges employees face in balancing career and care and the areas in which they need support to successfully combine work and care.
  2. Get the team involved. Focus on team design rather than role design and collaborate on team-based flexibility solutions. Consider how the components of all team members’ roles can be covered without inconveniencing customers or colleagues and maintaining quality and service standards. Of course, this isn’t necessarily straightforward and it’s important to be fair and equitable to other staff, but it’s easier when we think of work as an outcome we produce, rather than a place or time.
  3. Find your flexibility advocates. Demonstrate to your workforce that flexible working is mainstream, gender neutral, outcome-orientated and can work at all levels.
  4. Empower leaders to have positive discussions about flexible working. Support employees’ career progression by being transparent about how compensation and promotion decisions will be handled when working flexibly, and how they can ease back into work or take on more responsibility once their caring responsibilities reduce or end.
  5. Track the take-up of flexible working options and support mechanisms for carers. If they’re not attractive, or not reaching a particular group within the broader population of carers, keep exploring opportunities and trying other alternatives.

Flex-agility is the way of the future workplace

Undertaking a care census and revisiting the flexibility options can help employers to future-proof the workplace by supporting employees to balance care responsibilities with work as the need arises throughout their career. Building a culture of care and designing appropriate supports for carers in the workplace is a complex, long-term undertaking. But the sooner that employers discover how best to support working carers, the more they stand to gain from allowing them to reach their performance potential. In turn, the more that flexible work arrangements are role-modelled as mainstream, the better an employer’s prospects for attracting and retaining a talented and diverse workforce going forward.

When an ex-employee goes to a competitor or starts poaching clients or staff, employers often look to a restraint of trade clause to protect key business assets such as client relationships or company confidential information.

Often a quick decision needs to be made: apply to the Court to stop the ex-employee, or wait and sue for breach of contract damages at some later time. Wrapped up in this decision is the important issue of prospects of success – an employer will want to know there is a good chance of a successful outcome.

Whilst there is a general perception that restraints of trade are difficult to enforce (some lawyers even hold the blanket view that they are never enforceable) the only empirical study of Australian court judgments (Chia and Ramsay, 2016), which looked at all restraint of trade cases that went to final court determination in the period 1989 to 2012, found that the outcome across all cases in Australia in that period was:

  • The Court enforced the restraint 46.2% of the time
  • The Court found the restraint valid 17.2% of the time, but did not make enforcement orders (usually because the Court found no breach of the restraint or the employer suffered no damage)
  • The Court found the restraint invalid 36.5% of the time

The State/Territory breakdown found that NSW had the highest enforcement success rate (56.1%) whilst Victoria had an enforcement success rate of 30.7% and a finding that a restraint was valid (but not enforced) of a further 15%, meaning that the Court ruled the restraint invalid in 53% of cases.

Enforcing restraints of trade
Enforcement of restraints of trade in New South Wales and Victoria

There are at least a couple of reasons why NSW has a higher enforcement rate than Victoria. First, there is specific legislation in place that empowers a court to construe and read down a restraint that is excessive to reduce its operation to that of a reasonable protection, so long as that protection is within the confines of the restraint agreed between the parties. There is some qualitative evidence (Arup et al., 2013) to suggest that NSW is being nominated as the jurisdiction governing the contract to take advantage of this legislation. Second, NSW is a bigger State than Victoria with more employees, and the financial services and insurance industries, which are over-represented in restraint cases, are larger in NSW and hence generate more litigation.

I suspect these numbers – Australia wide and State by State – show odds of success that are much higher than is the general perception.  These aggregate numbers also leave out successful settlement negotiations prior to trial – it is not uncommon to agree a fresh restraint by consent, or some other compromise, rather than proceeding to final hearing.

The best decisions, including whether to start a legal action or not, are made by combining human expertise, experience and instinct, and objective data. The human experience allows us to weigh complex trade-offs and risks in pursuit of an objective. The objective data helps us to make decisions free of biases, many of which are subconscious.

Of course, every case is different and success in any individual matter has many essential ingredients. This aggregate data is useful in that it shows that an ex-employee’s restraint can be an effective tool to protect business assets. It is always a matter of ensuring that the essential ingredients, covered in other blog posts are present.

Lots has been said recently in the press about enterprise agreement making and the approval process by the Fair Work Commission (FWC). In short, the numbers of agreements being made is down and approval times are “long”. The graph below, recently cited in an AFR article, demonstrates a possible link between approval times slowing and a Full Bench decision involving Coles. But the numbers are turning.

It’s not the only decision at play and it’s far from the whole story.

A steady stream of Federal Court decisions has effectively set the level of scrutiny that the FWC must apply – scrutiny which puts high demands on the FWC and in-turn those seeking approvals. Delays are inevitable, particularly given the FWC works with the parties on curing approval defects where possible. In effect, the FWC often does the work of the parties to ensure the approval requirements are met. Bear in mind that there are between 3,000-5,000 agreements to approve each year. Each approval requires over 30 requirements to be met, necessitating more than simply a “tick box” to deliver on the legislative charter. To suggest that this is a simple “rubber-stamping” process is wrong. There are 43 Fair Work Commission members who are charged with this.

We recently prophesied that the numbers would turn. Recent statistics from the FWC bear this out. A legislative change late last year enabling the FWC to approve agreements in a way that overlooks “minor procedural or technical errors” is enabling faster approval times. The corollary of this is that the FWC must still identify but, can overlook, errors made by parties who file agreements that do not meet the legal requirements.

In time this will probably see many an employer becoming even more blasé about the agreement-making requirements, because the FWC can more readily come to the rescue. But with all the criticism levelled at the FWC at approval delays, its patience and willingness to work with the parties to ensure approval might be tested. In other words, will we see non-compliant agreements more readily rejected, rather than time taken to clarify certain facts or fixing application errors?

An enforceable restraint of trade can be a key business asset, giving an employer time to recover when a senior employee has left the business for a competitor. Like a good insurance policy, it’s a big relief to have it when you need it.

Australian law regarding restraints of trade has its history in 19th Century England and the prevailing concerns of that time.  Of course the law has developed incrementally since then. However, by and large, an employee restraint protects certain interests within defined geographical boundaries such as a city, state or country.  This made sense in a bricks and mortar world of commerce, but how can employers protect their interests in the modern digital economy?

We have worked with a range of clients to protect their interests across borders. Novel thinking is required to draft employment restraints so that they are effective within the established legal framework.  Our Australian Partners have litigated hundreds of restraint of trade cases and have developed a deep understanding of the issues and what it takes to win.  We share some thoughts below:

1. Ensure restraints protect the right cyber micro-markets

Cyber-markets can be broken down into many possible divisions: by country location, product or service, individual seller/retailer website, personal characteristics of the consumer (age, gender, occupation, hobbies) among other things. What this means is there are sections within any market which a departing employee may lawfully target which will not affect an employer’s current business.  Say, for example, an employer operates an online gambling business for rugby and AFL which serves clients in Australian capital cities but does not offer services for online horse racing in the UK.  A departing employee might be able to set up a competing website, also operating geographically from Australia, to offer online gambling in UK horse racing. The cyber micro-markets are different, so the two companies are not competing in that market.  But there is room for a restraint to work in areas of overlap subject to the terms of the restraint covering the correct cyber micro-markets.

2. Confining an employer’s cyber-trade interest to its client list

Where an employer provides a range of services in a cyber micro-market, the most efficient and clear way to protect its interests – for example, the legitimate interest of client connections, may be naming particular clients in a market, along with other appropriate terms.  This type of drafting can be effective to protect relationships built with particular clients situated within defined boundaries.

3. Enforcing cyber-market restraints where an employee engages in cyber-trading within the boundaries of an enforceable geographic restraint

Essentially, this means that an employer who reasonably restrains employees by geographical restraints is to be entitled to have this capture cyber-business within the geographical restraint.  For example, an employer can protect its interest in client connections regarding their telemedicine counselling services provided to public and private hospitals in, say, Sydney and Melbourne against former employees providing competing services to customers in these locations for a certain period of time, but would not be entitled to restrain a former employee from providing the same services to patients in aged-care homes in Perth, Adelaide or the United States.  A restraint will be effective so long as it is well drafted and ensures that providing services to clients through the internet within this geographic boundary is prohibited.

The above framework for drafting restraints supports the following public policy benefits:

  • ensuring a level of trade and (not unfair) competition while offering reasonable protection of an employer’s legitimate interests; and
  • allowing markets to grow and prosper for the benefit of consumers.

Keep enforcement front of mind where cross-border litigation is a possibility

 A cyber-restraint, like the internet itself, is a global construct.  But courts are country and state based and their jurisdiction is usually limited by geography.  That made sense when most trade was local but can be problematic when trying to enforce a restraint across borders.

A 2017 decision of the Western Australia Supreme Court provides an example.  Naiad, a U.S. employer sought an interlocutory injunction to restrain a defecting employee from operating a competing business in Western Australia. After grappling with the applicable law and jurisdiction, the Court concluded that the reasonableness of the restraint was governed by US (Connecticut) legal principles (given particular terms of the contract) but the grant of an injunction was governed by Western Australian law.

The situation is complicated because some countries (for example, Australia and the United Kingdom) have arrangements in place to recognise each other’s Court judgments and orders meaning that international litigation encounters less problems.  But this is not so as between many other countries.  The upshot is that it is important to consider how a restraint term will be enforced up front. Otherwise, there may be a right but no real way to achieve a remedy.

Subscribe to receive the next Workplace Law & Strategy blog direct to your inbox.

In a previous blog, we’ve mentioned the decline of enterprise bargaining in Australia.

Some data to support this follows in this blog. Both agreement numbers and employees covered by in-term agreements are in decline. Point 7 and 8 highlight the challenges faced by parties making agreements and the Fair Work Commission in processing agreement approvals.

Enterprise bargaining in Australia: the state of play

A printable PDF version of the data is available here.

Subscribe to receive the next Workplace Law & Strategy blog direct to your inbox.

In yesterday’s blog, we commented on the state of play in enterprise bargaining in Australia.

So what’s the outlook for enterprise bargaining in Australia? Here’s the top 7:

  1. Collective bargaining remains unlikely to be the answer for productivity gains – as has been the case for some time. Nor will it deliver the across-the-board wages growth sought. Of course, there will be exceptions to the rule. But my observation here is one generally about the ability of the system to generate productivity gains. Of course, there are some sectors where deriving and measuring such gains is very difficult, if not illusory, in any event.
  2. Complexity is here to stay. The rules surrounding the making of agreements, laudable in their aim in providing protections for employees, make the process and approval regime demanding on employers, and the Fair Work Commission.
  3. The key determinant of bargaining outcomes will be power. The pendulum of “power” at the negotiating table will, to some extent, move with the market – but not completely. Over the last 10-20 years, claims have moderated as economic conditions deteriorated. We have seen, for instance, more moderate claims in Western Australia in construction as the resources tap tightened.
  4. Large and high-profile employers will remain in union sights. They are vulnerable to aggressive campaigns and effectively set the wages for others.
  5. Pattern-style bargaining became more prevalent by stealth. The TWU made this prophecy real just last week.
  6. Employers who influence a worker supply-chain such as major retail will become an increasing target of “activism”. Will we see GetUp involved in this space?
  7. Collective bargaining will continue to decline as workplaces become more fragmented and the incentive to bargain decreases. Power will dictate the incidence of enterprise bargaining.

This all assumes no, or only limited change, to the Fair Work Act.

Subscribe to receive the next Workplace Law & Strategy blog direct to your inbox.

A consistent theme in recent years for both employers and unions is that enterprise bargaining is broken.

The genesis of enterprise bargaining in the mid 1990’s lay in its potential to generate productivity gains at a time when workplaces were strangled by terms and conditions set for whole industries and occupations, divorced from the particular needs of a workplace. At the time, enterprise bargaining presented opportunity. But this potential is all but exhausted.

Most negotiations are now centred on squeezing a wage outcome. Employers jump on the bargaining merry-go-around every three or four years to avoid protected industrial action. Thus the process for many employers is one of risk and its avoidance, rather than opportunity.

For unions, enterprise bargaining is not delivering sufficient wage growth. Unions also argue that the process can be easily stymied by employers who are alleged to “game” the system – meaning that they find ways to avoid bargaining or work around the spirit or intent of the bargaining laws. There’s another challenge for unions. Resourcing every negotiation isn’t easy. There are, after all, around 5000 agreements made each year.

The system relies on “power” based bargaining – at least in key sectors. The party with the most power prevails. Ironically, it’s large employers that are vulnerable to the power of a union to disrupt the business through the power of industrial action or some other campaign. Business decision making focuses on the short term, as agreements are reached to avoid the immediate impact of industrial action (which it needs to be acknowledged can have longer term impact). However, the long-term impact of doing the deal is often under-estimated.

The higher education sector is a great example where the union has successfully secured excellent outcomes and leap-frogged them across the sector. These outcomes include highly restrictive provisions around workplace change that rival anything on, say, the waterfront.

Collective bargaining is on the wane in the private sector with rapid declines in the numbers of agreements and employees covered. A sharp decline has occurred under the watch of the Fair Work Act despite it promoting “enterprise-level collective bargaining” as one of its seven objects. The reasons for this are varied and will be the subject of a further blog.

Tomorrow we will identify our top 7 on the outlook for enterprise bargaining in Australia.

Subscribe to receive the next Workplace Law & Strategy blog direct to your inbox.

The debate on what is to be done about slowing wages growth of Australian workers is, understandably, receiving an increased focus in the midst of an intense election campaign.

The Labor Party has described this election as “A referendum on wages”. The Australian Council of Trade Unions, under its “Change the Rules” campaign, argues that the workplace relations system is biased in favour of employers’ who are choosing to keep wages low and taking this labour share in the form of corporate profits. The solution, we are told, is further regulation and to increase union rights and bargaining power so that unions can extract better wage deals.

This paradigm disregards significant and powerful international and Australian economic research which examines the root cause of slow wages growth, and concludes that the major factor is advances in, and reductions in the price of, increasingly sophisticated technology and the emergence of global supply chains. The material referred to does not suggest that declining union density or bargaining power have had any material impact. Misdiagnosis of this problem is very likely to result in poorly targeted solutions which will be at best ineffective and, at worst, exacerbate the problem being solved for (such as adding higher unemployment to slowing wages growth).

This wealth of research shows that slowing wages growth is not a uniquely Australian problem. It is a prevalent phenomenon across many advanced economies, irrespective of the architecture of their industrial relations system. Advances in many forms of technology have induced companies to chase productivity and efficiency by moving away from labour and toward capital with the effect that the labour share of income has steadily declined. The effects on workers have been most pronounced in advanced economies where labour costs are highest. The historically low interest rate environment (reducing the cost of investment) has played its part. Businesses of all shapes and sizes must continually make these choices if they are to succeed in a hyper competitive global market.

To take a snapshot of the available learning: in 2013, two University of Chicago Booth School of Business economists, in a paper published by Oxford University Press, concluded that the global labour share of income has declined consistently and by at least 50% since the 1980’s in the large majority of countries and industries. In 2017 the International Monetary Fund examined the problem in its World Economic Outlook, noting that in advanced economies wage growth had flatlined. Closer to home, in November 2017 the Australian Treasury in its “Analysis of Wage Growth” reached similar conclusions and noted that “the relative price of investment to wages has fallen over time due to large falls in the price of machinery and equipment and computer software”. In 2018 an OECD report concluded that across 24 OECD countries, real median wage stagnation has occurred concurrently with a decoupling in productivity growth (which has also slowed) mainly due to technological progress and the expansion of global value chains. Finally, last month the RBA in its paper “Is declining union membership contributing to low wages growth” concluded that the declining trends in unionisation rates are unlikely to have materially contributed to the decline in wages growth.

So if slowing wages growth is a global, macro, advanced economy problem, what is the solution? The answer inevitably will be multi-faceted and context driven. Ensuring Government policy incentivises investment in knowledge based capital is a common recommendation in the research. Bringing Australian workers as high up the skills value chain as possible is paramount. Constant innovation; supporting growth industries and training or re-training employees to work in them; stronger partnerships between Universities and business, will all form part of the mosaic. We could do worse than consider the recommendations of brilliant Philanthropist and self-made billionaire Ray Dalio, who clearly cares deeply about these issues.

Artificially lifting wages or increasing labour market regulation and union power will not work, at least beyond the short term sugar hit. As concluded in a 2017 OECD Economic Survey:

Ensuring competitive and flexible product and labour service markets is particularly important in Australia. The country’s geography separates markets, compromising competition for goods, services and labour. Whilst Australia’s regulatory and policy frameworks are already relatively flexible and supportive, further improvement would enhance the economy’s ability to absorb innovation and increase the share of businesses operating at the frontiers of technology and best practice”.

Ultimately, ensuring Australian companies have every chance to compete and succeed, buttressed by Government and business support, gives us our best chance of ensuring that Australia’s workers receive the high wages they deserve, and minimising the dislocation that can unfortunately occur in a rapidly changing global economy. Solution myopia in the face of new global problems will not serve us. It will set us back by distracting us from what really needs to be done to prepare for and thrive in a different world.

Subscribe to receive the next Workplace Law & Strategy blog direct to your inbox.