When an employer decided to circumvent its existing enterprise agreement and set up a proxy company to cut costs, it was heading towards engaging in adverse action. It has failed miserably in its quest, with a $14,000 fine in the federal court and no closer to solving its costs problems.
The employer was faced with rising costs and it decided that, rather than confront the realties and negotiate adjustments to its existing enterprise agreement, to set up a separate new company, with inferior employment conditions. It would then outsource the work it needed done to this entity.
The union got wind of the secret plan and filed adverse action claims in the federal court, alleging that the main reason for the actions of the employer was to deprive employees of their existing workplace rights under the existing (more expensive) enterprise agreement.
The federal court agreed and harshly criticised the employer’s senior management for their behaviour. It said management knew its plan was calculated to achieve cost reductions and this axiomatically would mean a reduction in benefits to the existing employees if they were obliged to take up work with the new entity. The work they were doing would only be done by the new entity, the existing employer would no longer provide those services.
The court was also critical of the secretive way the employer went about its plans. That in turn added weight to the proposition that adverse action was going to occur and for a prohibited reason, namely, that employees were entitled to the benefit on industrial law. The court was not sympathetic to the need for costs reductions. On the contrary, the judge was critical of the failure of the employer to express any regret for its actions.
While there is no bar on an employer trying to reduce labour costs overall, it cannot go about it in a way which points to deliberate intention to deprive an employee of an existing right. As the judge in this case said, the appropriate way forward is to renegotiate the agreement.