In a modern Australian business environment marked by onerous legislative and regulatory requirements, employing staff is not easy.

In addition to the legal obligations on business, there are many other things to consider – insurance, licences and registrations, maintaining revenue growth and cash flow – and many businesses have neither the time nor the resources to properly consider the mechanics of hiring and managing people. Consequently, they leave themselves at risk of litigation when problems inevitably arise.

Too often, well-intentioned small businesses try to do the right thing; however, due to the ever-evolving industrial relations landscape – shaped not just by legislation, but by factors such as Fair Work Commission determinations and precedent court decisions – many employers find themselves in breach of the Fair Work Act, other industrial law instruments and/or OHS regulations.

From discrimination cases to claims relating to unfair dismissal or adverse action matters, much of the employment-related litigation faced by small businesses could be avoided if proper risk management strategies were implemented.

Simply stated, mistakes made by businesses invite lawsuits from staff when “it all goes pear-shaped.” Among myriad bad practices that almost guarantee legal trouble, the three biggest mistakes made by businesses are:

Failure to Invest in Appropriate Employment Documents

As unbelievable as it sounds, some employers engage employees without providing contracts of employment. Unsurprisingly, when disputes arise in these cases, no explicit terms exist in writing to deal with them. This causes ambiguity in employment relationships, and renders employers liable for avoidable costs that would not have been incurred had proper employment contracts existed.

In cases where employees are dismissed without an employment contract, it also leaves employers open to ambit claims: such as for “reasonable notice,” an area of employment law in which disputes are becoming more prevalent. For example, whereas an employment contract might stipulate a minimum notice period of two weeks for an employee of two to three years’ standing, a court might consider what is “reasonable,” taking into account a range of information and other factors submitted by the employee, which could add months to the payout the employer would be required to fund if the employee’s legal action succeeded.

In other cases, employers are unable to discipline employees for misconduct because they failed to institute workplace-specific policies and procedures (see below) that reflected their company values and the standards of behaviour and performance expected from their staff.

Disputes of the types outlined above (and others) could have easily been avoided had appropriate employment documents been in place, and provided to employees at the commencement of employment.

Failure to Implement Appropriate Policies and Procedures

Another area of business operations that can spell trouble for employers centres on instances in which company policies and procedures may in fact exist, but were never distributed to, or acknowledged by, employees.

Recent case law demonstrates that having employees merely acknowledge the existence of a policy is insufficient to defend legal actions. In the proper discharge of their obligations, employers should deliver (at a minimum) annual training so employees are aware of expectations of their behaviour in the workplace and how those expectations may have evolved over time.

Whilst the list is not exhaustive, every business – irrespective of size, turnover or employee headcount – should have (at the very minimum) policies relating to OHS matters, social media conduct, employee leave entitlements, protocols for disciplinary action, an alcohol and drug policy, and policies governing procedures for employee expense reimbursement and allowance payments.

Failure to Properly Conduct Workplace Investigations

From time to time, allegations may be made by one employee against another, or a workplace incident may occur (for example, damage to company equipment).

At the outset in such instances, many employers fall into the trap of unilaterally declaring guilt or apportioning blame without following due process and affording procedural fairness to the employee or employees involved. Notwithstanding that valid reasons to discipline and/or dismiss the employee/s involved may exist, there have been numerous cases in which employees were awarded compensation or reinstated because their employers did not follow the principles of natural justice.

Many of these situations may have been avoided if employers had conducted proper investigations into workplace allegations or alleged misconduct. Workplace investigations are often best performed by independent, objective third parties (for example, external investigators or law firms engaged specifically for this purpose) which can impartially gather evidence and present it to the final decision maker within the business.

The benefits of such an approach include minimising the risk of litigation, should litigation ensue, and that the report from the external investigating entity may be covered by professional and legal privilege.

Whenever a business employs people, it is imperative to ensure that not only are the appropriate business documents in place, alongside written, codified policies and procedures governing employee conduct, but that set processes are followed in cases where things go wrong. The alternative is litigation, which can be costly, damaging to the business’ reputation and – in many cases – which could have been avoided.

Rankin Business Lawyers is a commercial law firm specialising in all aspects of employment law. As the information in this column is general in nature only, businesses requiring assistance with workplace relations matters and/or creating (or reviewing) appropriate staff management systems should contact us for practical, on-point legal guidance.

Daniel Le
Lawyer