December 12

Professional sports contracts: Are they worth the paper they are written on?

As a matter of principle, professional sports contracts, whether it be in the NRL, AFL, A-League or Suncorp Super Netball, are more or less the same as other employment contracts. The athlete is the employee and the club that they play for is the employer. Both types of contracts set out the terms and conditions that will govern the relationship between the contracting parties and includes terms relating to salary, KPIs, length of the contract and termination of the contract. In reality though, the practicalities surrounding sports contracts are vastly different, especially regarding their termination.

A prime example of this is the news recently that Jarryd Hayne effected the end of his contract with the Gold Coast Titans to return to Sydney to fulfil his current “lifelong dream” to play for the Parramatta Eels. This isn’t the first time, nor will it be the last, that NRL players have effectively walked out on their clubs with many in the past unable to resist the lure of a well-paid gig in overseas rugby union (I’m looking at you Sonny Bill Williams and Semi Radrara). Hayne himself is a repeat offender having previously walked out on the Eels in 2014 to pursue his then “lifelong dream” to play in the NFL. Standard NRL player contracts do not generally contain an out clause so it has become somewhat common for a player seeking to move to reach a “mutual agreement” with their club whereby the contract is terminated, and the player free to go elsewhere.

The issue isn’t just confined to rugby league either. The AFL has seen a large number of players in the recent trade period, such as Jake Lever, Charlie Cameron and Josh Schache, effectively pushing through their own trade to move back to the state in which they grew up. This so called “go-home factor” has seen players like Charlie Cameron, previously of the Adelaide Crows, requesting a “compassionate” release from his contract so he could be closer to his family and friends. Cameron got his wish, he is now back in QLD and will line up for the Brisbane Lions in 2018.

This contrasts significantly with an ordinary employment context, where an employee is rarely able to up and leave with their employer highly unlikely to reach a “mutual agreement” regarding a release. Ordinary employers certainly would not allow a mutual termination because of a “go-home factor”. If an employee was adamant on leaving, their employer would insist they provide notice under their contract of employment. For particularly skilled and highly valued employees (which would be a fair description of professional athletes), their contracts generally provide long notice periods in which their employer can place them on gardening leave as well as enforce restraints of trade that prevent them from working for competitors.

From the perspective of the clubs, I often wonder why they rarely play hard ball with their players and try to prevent them from leaving. Clubs rarely insist on the performance of the player’s contract (with the Sonny Bill situation being a notable exception) despite investing significant resources in them in the form of money, development and draft picks. Nor do clubs attempt to enforce restraint of trade provisions after they have left. Clearly, clubs would much rather cut their losses and run than have a $1.2 million a year player such as Jarryd Hayne, or a number 2 draft pick such as Josh Schache, sulking in reserve grade when they could let them go, and use that money and salary cap space to recruit someone who wants to be there.

However, it would seem the pendulum has swung too far towards player power with clubs seemingly unable to ensure that their players, many of whom are extremely well paid, honour their contracts. Professional sporting clubs need to consider whether a hard-line approach should be adopted because it is clear that if the status quo remains, professional sporting contracts will continue to be worth less than the paper than are written on.

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July 1

Unfair Dismissal or General Protection? A high pressure choice facing employee litigants

When National system employees are unlawfully dismissed from employment they will generally have a choice of which section under the Fair Work Act to make their application.  Was it an Unfair Dismissal, or was it a contravention of a General Protection involving dismissal?  There is considerable overlap in these actions, but the Fair Work Act insists that only one may be chosen, the choice must be made within 21 days, and the choice is final.   In employment law practice, coming upon a case where an inappropriate choice has been made is a weekly occurrence.  If settled at conciliation this mistake has no consequences, however if the matter proceeds, often this error can be the difference between success and failure.

At first glance the actions seem similar.  A dismissal is ‘unfair’ if the Commission hold it to be ‘harsh, unjust or unreasonable’.  A General Protection, on the other hand, is contravened if an employer takes any type of adverse action against an employee on unlawful grounds, which includes because of the employee the exercising, or proposing to exercise, a workplace right.

But despite the fact that the contextual factors giving rise to these actions are similar, the causes of actions themselves are radically different.

Unfair Dismissal is constrained by strict jurisdictional parameters – parliament very clearly intended this provision to be only open to a specific class of employees.  It is not available to people earning over $138,900 per annum, to people that have been employed less than six months (or one year in the case of small business employers), the person must be ‘dismissed’ in accordance with a specific statutory definition, it is not available in the case of a ‘genuine redundancy’, and it is not available to casual employees unless they have been engaged on a ‘regular and systematic basis’. These parameters are strictly enforced at the Commission.  In legal terms, they have no jurisdiction to do otherwise.

But once the jurisdictional hurdles are overcome, the Commission have a broad discretion to assess the dismissal holistically, and it is only required that the dismissal be ‘harsh’, ‘unjust’, OR ‘unreasonable’. In the often quoted words of High Court Justices Gummow and McHugh “a termination may be harsh but not unjust or unreasonable, unjust but not harsh or unreasonable, or unreasonable but not harsh or unjust.”   These concepts pre-date the Fair Work Act, and at common law it is well understood that an ‘unjust’ dismissal is one in which the employer lacked a valid reason, or in which the employee was not guilty of the misconduct alleged.  An ‘unreasonable’ dismissal is one in which the employer acted unreasonably in coming to the decision to dismiss, or the employee was not afforded adequate procedural fairness.  A ‘harsh’ dismissal is one in which the decision to terminate the employment, within all of the circumstances, is disproportionate to the gravity of the misconduct.   This common law meaning is neatly codified by s 387 of the Act.  Generally, a case will get over the line if the Commission finds any significant fault of this type.

These jurisdictional hurdles are absent for a General Protection application, however in contrast to Unfair Dismissal each of the elements must be proved. If adverse action is alleged in response to the exercise of a workplace right, the employee must clearly identify the workplace right, and demonstrate that they exercised, or proposed to exercise that right.  If this is done, the onus then falls on the employer to prove that the exercise of workplace right was not one of the reasons for the adverse action.  Significantly, however, the reverse onus in itself does not make the employee’s case.  If the employer can prove that the exercise of a workplace right was not a factor in the mind of the decision maker, as a question of subjective fact, then the case will fail.

Many cases would satisfy both, and many would satisfy neither.  In my experience the choice to go with a General Protections application is made either because of the jurisdictional limitations of Unfair Dismissal, or because of the limited scope of compensation available in an Unfair Dismissal application (capped at 26 weeks).  For these reasons, but in particular the high income threshold, General Protections have become the default stomping ground for disgruntled executives.  But in the chase for a larger compensation, many litigants don’t realise that their case may become harder to prove.

FWCOn the other hand, lower paid workers, especially those without representation, often rush to file an unfair dismissal application within the 21-day time limit without ever knowing or getting legal advice that the General Protection provisions may be more appropriate for their case.

In James Morphett v Pearcedale Egg Farm [2016] FWC 1940, the employee was dismissed for aggressive behaviour and offensive language during a workplace meeting.  The employee brought an unfair Dismissal application.  The employee had been angry because he had injured himself at work, and had been threatened with termination because the employer had not wanted the injury to go through work cover.  During the meeting he lost his temper and threatened the employer, resulting in his dismissal.  The Commission held that while the employee’s anger was ‘understandable’ the conduct was not, and ruled that the dismissal was not unfair.  But from the limited facts available, it is very clear that the earlier threat to dismiss was in response to a proposal to exercise a workplace right.  This breach would not have been cured by the employee later losing his temper and being dismissed.  Had he brought a General Protection application, he would have had a much greater chance of success.

CFMEU v Anglo Coal (Dawson Services) Pty Ltd [2015] FCAFC 157, is an example of the exact opposite.   The employee had applied for two days’ annual leave which was refused, and then threatened the employer that he would take sick leave instead.  Coincidentally, on the date in question the employee was genuinely sick.  The employee was sacked, due to the employer’s genuine mistaken belief that the employee was being dishonest in taking the leave.  The employee brought a General Protections application but failed, due to the fact that because the mistake of the employer was genuine, it could not be shown that they made the decision to dismiss him for the prohibited reason.  In spite of the onus, the employer was able to prove that there was no causal connection between the exercise of a workplace right and the decision to take adverse action.   The federal court noted the injustice, but specifically mentioned that an unfair dismissal action had been available to the applicant. Had the action  been brought this way a remedy would have resulted.  It was the applicant’s litigation strategy which had denied him relief.

In summary, an unfair outcome, irrespective of the reason, is almost always best dealt with in the Unfair Dismissal jurisdiction. However, unfair or unlawful intentions on the part of an employer often will be punished more thoroughly under the General Protections provisions. But each case will depend on its own facts. These two recent cases illustrate the dangers of making this assessment incorrectly.  Given the difficulties in this area, and the trouble many employees face in accessing expert legal advice, these won’t be the last.

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May 4

Out of work conduct: when is dismissal justified?

We see it all the time in professional sports: athletes losing their contracts over poor decisions made away from the game. Take for example, Todd Carney who was spectacularly sacked from the Cronulla Sharks, without procedural fairness, following the ‘bubbler’ incident, or Nick D’Arcy who was kicked off the Australian swimming team bound for the Beijing Olympics after he punched former swimmer, Simon Cowley, in the face, breaking his jaw. The reason that is almost always given by the clubs and sporting bodies to justify the athlete’s termination is that they ‘brought the sport into disrepute’ or that they breached the team’s code of conduct.

Due to the tremendous amount of attention that is received when a professional athlete puts a foot wrong and then the subsequent disciplinary action that inevitably follows, it is not unusual for employers to similarly think that they are entitled to take action against an employee when they exhibit out of work behaviour that they do not agree with. Whilst this is normally behaviour which would be considered criminal and which the police are involved in, it also increasingly includes posts on social media which could be damaging to a colleague or the business as a whole. So then, when can an employer dismiss an employee for conduct that occurred away from work?

The key for employers to remember is that they have very little control over how an employee chooses to spend their time away from work. They cannot dictate what an employee can or cannot do unless there is a sufficient connection to the person’s work and likewise, it is very difficult for an employer to terminate an employee’s employment (which will subsequently not be found by the Fair Work Commission to be unfair) for out of work conduct.

In Deeth v Milly Hill Pty Ltd [2015] FWC 6422, an employer was found to have unfairly dismissed an apprentice butcher after he had been arrested for being an accessory after the fact to murder. The employer produced evidence that customers would boycott the small butchery and other employees would resign if it continued to employ the apprentice. However, the Fair Work Commission found that the employer had a ‘knee jerk’ reaction to the arrest and should have carried out a reasonable investigation prior to terminating.

This case makes it clear that employers must be extremely careful when terminating an employee for out of work conduct. Further, employers must still ensure that a fair process is carried out, no matter how serious the alleged out of work conduct is. Just one of the factors that the Fair Work Commission must have regard to when determining an unfair dismissal is whether the employer had a valid reason for dismissal. The other factors which are considered are all relevant to whether a procedurally fair process was implemented and whether the employee was given the opportunity to respond to the allegations prior to termination.

However, there will be times when an employer can consider termination (following, of course, a procedurally fair process), including when the behaviour:

  • Damages the reputation or commercial interests of the employer (for example, by very specifically referring to the company on social media in a damaging or disparaging way);
  • Is incompatible with the employee’s duties that they perform for the employer (for example, if a truck driver had their licence suspended or cancelled for high range drink driving);
  • Occurs at an extension of a work related event or occurs in the presence of colleagues (for example, if a person becomes intoxicated at a work event and after it has ended, an employee sexually harasses a colleague).

In Kolodjashnij v J Boag and Son Brewing Pty Ltd [2010] FWAFB 3258, Fair Work Australia (as it was then called) found that an employee who had been terminated after being charged with driving his personal vehicle whilst three times over the legal blood alcohol limit, was not unfair. Importantly in this case, the employer, who was a manufacturer of alcohol, had a policy that stated that if an employee was charged with drink driving, their employment would be automatically terminated because of the negative impact it would have on the business, which was located in a small town. In this case, the employee was aware of the impact a drink driving charge would have. Further, the employer took time to make the decision and allowed the employee to respond to the allegations which were made against him, ensuring that the process was fair.

What is important for a business to ensure when it comes up against an employee who has acted poorly outside of work is to consider the impact that it actually has on the business. Whilst the employer might find the conduct to be morally or ethically wrong, this will not be enough to terminate the employee’s employment. The conduct must be sufficiently related to the employee’s job so as to impact the business’ reputation and/or render the employee incapable of carrying out their duties.

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February 28

When High Performers Behave Badly

Most people will remember the ‘fracas’ that arose early last year when popular television show host, Jeremy Clarkson, allegedly punched a producer of Top Gear after failing to have a hot steak delivered to him after a day of filming. At the time, everyone had an opinion as to what the BBC should do about the situation, with Prime Minister David Cameron even weighing in saying that Clarkson was a “huge success” and that he would be disappointed if Top Gear didn’t continue. Even our own contributor, Helen Carter, weighed in on the matter, albeit with an extremely different opinion than that of the UK Prime Minister.

Ultimately, sense prevailed and the BBC determined that Clarkson’s conduct warranted termination of his employment. Following the investigation, Director General of the BBC, Tony Hall stated:

“For me a line has been crossed. There cannot be one rule for one and one rule for another dictated by either rank, or public relations and commercial considerations.”

This is a statement which may seem an absurd concept for some managers when issues relating to high performers arise. Why would a manager want to take disciplinary action against an employee who may be largely contributing to the success of the business, especially if that disciplinary action is likely to result in their termination? After all, Clarkson’s sacking was followed by James May and Richard Hammond’s decision not to renew their contracts, ultimately resulting in the demise of Top Gear, BBC’s most popular and highest earning program.

We often have clients come to us with allegations of misconduct against high performing employees. Sometimes it might be a senior manager who bullies and harasses more junior staff and other times it can be that the employee feels that they are such an asset to the business that they think they can work (or not work, as the case may be) whatever hours they like. In most circumstances, managers are reluctant to take any action against the employee for fear that they will ‘rock the boat’ and lose out on the clients or money that the employee brings to the business.

However, what managers often forget to consider is the impact that the behaviour is having on the rest of the organisation. Whilst you and your management team might be willing to put up with bad behaviour, other employees may not. Allowing a high performer to continue their unsatisfactory conduct can have widespread consequences for a business, including:

  • Adverse affect on culture within the business
  • Acceptance from other staff that the behaviour or conduct is acceptable
  • Belief that if another employee exhibits unsatisfactory conduct, no action will be taken against them
  • Risk of losing other employees as a result of their resignation
  • Negative impact on workers’ health and safety
  • Risk of employees becoming disengaged and withdrawn from their work
  • Potential legal proceedings being made against the business including bullying claims

Whilst taking disciplinary action against an employee need not always be termination of their employment, it should be made clear to all employees that they will be expected to comply with high standards and behave appropriately, regardless of their success or monetary contribution to the business. This can be in the form of coaching and counselling, performance improvement plans, training, demotion or warnings.

Unfortunately, many managers will be on notice for some time that their high performers are behaving badly prior to taking action. By this time, the issue may have spiralled out of control and effected the business on such a widespread scale to make the only viable option termination of the employee’s employment.

Taking swift action when an employee starts displaying inappropriate behaviour or attitude is far more likely to successfully reform the employee than sitting back and waiting until someone else complains about their conduct. This means that management are not then put in a difficult position of having to terminate the employment of an employee who contributes greatly to the success of the business.

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January 18

Redundancy

A recent decision of the Fair Work Commission regarding redundancy entitlements could have some unfortunate consequences for employees and, in my opinion, in the long term for business and the economy. In Compass Group (Australia) Pty Ltd  v National Union of Workers; United Firefighters’ Union of Australia [2015] FWCFB 8040 the Full Bench of the Commission held that a group of employees on fixed term contracts were not entitled to severance payments even though the employees had been in many case engaged on a series of fixed term contracts for a number of years. The employees all were involved in providing catering and hospitality services to the Department of Defence as part of a contract between Compass Group and the Department.  The employer concerned had a regular practice of terminating the employment of employees when a contract of the employer’s ended. Because of this regular practice the Commission held (and this is probably strictly correct at law) that the terminations were the “ordinary and customary turnover of labour” for that employer and no redundancy benefits were payable.

Under the redundancy provisions in the National Employment Standards redundancy payments are not required when a termination is a result of the “ordinary and customary turnover of labour”.

A direct consequence of this decision is likely to be that that some employers will be encouraged to have high turnover of labour, use fixed term and casual arrangements even more than is currently the case. This will jeopardise an already vulnerable group of employees.

Unfortunately, as managers are often rewarded for short term financial targets with little regard to long term benefits, many managers will be encouraged to embrace this short term cost saving without regard for the long terms interests of any employer in developing a skilled and loyal work force. It also impact the commitment of many the employees (who have no reason to believe a position will continue).

In my opinion the government should consider responding to this decision by amending the National Employment Standards so that only genuinely short term fixed contacts and casual employees (who have received casual loading) are excluded form the right to redundancy payments if their employment ends in circumstances of redundancy.

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September 2

NRL contracts – what are they really worth?

This NRL season has seen it’s normal amount of  controversy over players’ contracts.  Notably the the Daly Cherry Evans backflip, and Chris Sandow ‘s abrupt release from the Eels.   But the Wests Tigers Robbie Farah news last week takes the cake as a clear indication that the a Contract of Employment in the NRL is worth less than the paper it’s written on.   Farah was instructed by the club on Tuesday that he was no longer a feature in their future plans, to look elsewhere for a new role, and that if he remained at Wests Tigers in accordance with his $900,000 per annum contract he would be playing reserve grade next year.

From a footballing perspective the madness of this decision is outside the scope of this blog – and that issue is best left for the sports journalist to discuss further, as no doubt they will.

But it’s the business and employment perspective of this decision that baffles me, and yet another occasion this year as both an employment specialist and NRL fan that I’ve observed the business practices of these clubs being far below acceptable contemporary standards.

If Farah finds a new club in this short time frame the Tigers will, in the best case scenario, be subsidising  his salary in the region of $500,000 to have Farah play against them instead of for them.  All of this for a ‘fresh start’ and to free up relatively insignificant $400,000 in their salary cap.  In leadership terms, they will also be depriving themselves of one of their only senior players, and have no hope of recruiting anyone else at this late stage.  There is also the fact that publicly breaking promises to a loyal employee, to allow you to make new promises to other employees, is more than just morally flawed.  It’s strategically weak.  Employees are not that stupid.   If this action has led to a bad taste in the mouths of the fans and the wider community, what is it like in the locker room.

One way or another, it seems that between the 30 June cooling off period that allowed DCE to backflip, the provision for bilateral release like Sandow’s, and then this remarkable repudiation of Wests Tigers provides us with just three examples in as many months that demonstrate that NRL contracts are basically meaningless.  They are aspirational documents,  the only purpose of which is to create media attention around the re-signing of players.   This needs to change if the NRL clubs are serious about player retention and fan satisfaction.

Within the executive world, it is standard practice to allow unilateral termination of employment at will, with often as little as one month’s notice provided.  The NRL need to think about this as an option going forward, but with robust protections for players and fans.  For example, termination at will of a player’s contract by either party should be allowed, provided that a deadline half way through the season for all contract alterations for the following year should be observed.  This would prevent clubs from cutting players loose when there were no other opportunities, and likewise protect clubs from being stuck unable to find replacements.   If the  club exercises the right to terminate, a termination payment (preferably salary cap exempt) could be provided under the contract.

This bizarre eleventh hour move from the Tigers leads to an assumption that the true extent of their salary cap crisis is at the point where rational decisions are no longer possible.  This begs yet another question to the administrators of this sport.  How hard is it to manage the salary cap?  The rest of the business community deal with a range of compliance tasks every day of the week which are far more complex.   Why do NRL clubs find this so difficult to manage in advance?  With the discovery of numerous breaches in recent years, it’s clearly time to insist that clubs make all player contracts  publicly available.  This would provide for a industry wide self regulation system.  The clubs, aided by the media and other stakeholders, can regulate each other much more effectively than the hit and miss audits currently performed by the integrity commission.

Everyone else in the economy is finding creative ways to meet their business goals and maintain compliance.  It’s high time that the NRL followed suit.

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