Can Defriending on Facebook be Workplace Bullying?

KXBbwA September 2015 decision of the Fair Work Commission (FWC) resulted in a stop bullying order being made in favour of an employee of a real estate agency.

After a number of incidents between two employees, a confrontation took place between the employees in the tea room. One of the employees called the other a “naughty little school girl running to the teacher” and then defriended her on Facebook.  The Deputy President of the FWC said that action “evinces a lack of emotional maturity and is indicative of unreasonable behaviour… [she] took the first opportunity to draw a line under the relationship… when she removed her as a friend on Facebook as she did not like [her] and would prefer not to have to deal with her”.

Some of the reporting on this case has made much of the Facebook defriending incident. In the context of the case, however, it was one of the last in a long line of incidents between two employees with a broken relationship.  One employee’s response to their poor relationship was to belittle, humiliate, embarrass the other, and treat her differently from other employees.   It was repeated, unreasonable behaviour by that employee, which posed a risk to the health and safety of the other employee.  In fact, it resulted in her seeking treatment for depression and anxiety, and making a workers compensation claim against the employer.

The message for employers is to act promptly and reasonably when broken relationships at work start to turn toxic. Seek a mediated outcome between the employees, even engage a professional to assist, and avoid the stress, lost management time and cost of dealing with a stop bullying application before the FWC.

At Everingham Solomons, we can proactively and pre-emptively assist you develop your organisations approach to workplace bullying because Helping You is Our Business.

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Do the Words you have Used Reflect your Intentions?

KXBbwAs lawyers, when it comes time to closely examine the terms of a commercial contract, we often hear “Yes, that’s what the words say but what we really meant was…”. It is an uncertain and risky business practice to have commercial contracts in place in which the words do not reflect the intentions of the parties.

The High Court has recently restated the legal principles around determining the meaning of the terms of commercial contracts in the Mount Bruce Mining v Wright Prospecting case.  The proper approach can be summarised as follows:

  • Look at the text in disputes, the entire text of the contract, any contract, document or statute referred to in the contract, and look at the purpose of the contract.
  • Look at those things objectively – what would the reasonable business person understand the terms to mean.
  • Don’t look at the surrounding circumstances where the words of the contract are unambiguous or could have only one meaning.
  • Only look outside the contract to identify the commercial purpose or objects of the contract, or to determine between a choice of construction of the words in the contracts.
  • Again, do that objectively without recourse to evidence of the parties’ actual intentions and expectations.

So, most of the time what the parties actually meant will not even be considered and the parties will be held to the words they have used in the contract. The key is to be clear with the words in the contract and to ensure that they reflect your intentions for the deal.

At Everingham Solomons, we work with you to ensure the words in your contract reflect your intentions because Helping You is Our Business.

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PPSR – an important business tool

KXBbwThe Personal Property Security Register (PPSR) is an increasingly prominent tool for businesses, particularly for those that supply goods on credit or that lease/hire out goods to other businesses. But many businesses still do not understand the PPSR or how to apply it effectively.

The PPSR is an on-line noticeboard on which a person, who obtains an interest in another’s personal property as part of a transaction that secures payment or the performance of an obligation, can register their interest for the world to see. Personal property does not include land and fixtures but does include things like motor vehicles, household goods, plant and equipment used by a business, the inventory of a business, intellectual property and company shares.

By way of example, a supplier of equipment to a business that retains title to the equipment until it is paid in full will want to properly register a security interest on the PPSR over that equipment in the hands of the business until it is paid. If the business becomes insolvent, the supplier will only need to appoint a liquidator of the business to the PPSR in order to establish its title to the equipment.

Changes to the legislation behind the PPSR came in to effect on 1 October 2015 that particularly impact on those businesses that lease out goods that are required to be registered on the PPSR by serial number – motor vehicles, watercraft and aircraft most commonly. Until last week, a lease of a motor vehicle for more than 90 days would require registration on the PPSR if the lessor wished to properly protect its interest in the motor vehicle. Relevantly, the definition of “motor vehicle” captures a broad range of items that might not normally be considered to be motor vehicles.

From 1 October 2015, only leases of motor vehicles for effectively more than 1 year will have to be registered on the PPSR to properly protect the lessor. That change simplifies matters for the lessors of such goods but adds some uncertainty to those involved in a business sale who might be seeking to understand which assets of a business are in fact secured to or owned by a third party.

The PPSR is not easy to understand. At Everingham Solomons, we can assist you understand its application to your business because Helping You is Our Business.

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Are the terms of your business to business contracts fair?

KXBbwThe Federal Government is currently legislating to allow unfair terms in standard form contracts that small businesses enter to be declared void. Currently, only consumers who enter into such contracts are protected against unfair terms.

Why is this important? Small businesses are regularly offered contracts by their larger and more resourced counterparties, or even other small businesses, on a “take it or leave it” basis. Small businesses often lack the resources to fully understand and negotiate contract terms. Competition is fierce and who wants to “bite the hand that feeds”. The profit margin in a contract may not be enough to justify obtaining legal advice. As a result, unfair terms remain in these contracts and the risks of the contracts get allocated to small businesses, which are not always able to manage those risks.

By providing small businesses with a remedy against unfair contract terms, the Federal Government seeks to discourage the inclusion and enforcement of unfair terms in small business contracts. The theory is that contract risks will be more appropriately allocated between the parties and that small businesses will become more confident when contracting.

So, some FAQs:

  • When? From early 2016, so now is the time to review contracts you issue for any unfair terms.
  • What is a small business? One which has less than 20 employees, so most businesses in our region.
  • What is a small business contract? One where the agreed price for the supply or sale at the time of the contract is less than $100,000 or $250,000 if the contract term is more than 12 months. For larger contracts, small businesses will still have to undertake careful due diligence.
  • What are unfair terms? Those that cause imbalance between the rights and obligations of the parties and are not reasonably necessary to protect the advantaged party, and which would cause detriment to the other party if relied on.

At Everingham Solomons, we can assist you to get your contract terms in order before the changes occur because Helping You is Our Business.

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Employers: how flexible do you have to be?

KXBbwIn certain circumstances, a change to more flexible working arrangements can be requested by employees with at least 12 months continuous service with an employer and by long term casuals who have a reasonable expectation of continuing regular and systematic work.   These could include changes in hours of work, patterns of work or even location of work.

Employees with the following types of circumstances can request such a change:

  • those who are parents, or who have responsibility for the care of a child who is of school age or younger;
  • carers;
  • those with a disability;
  • those who are 55 or older;
  • those experiencing domestic violence, or those caring for, or supporting, an immediate family member experiencing domestic violence.

An employee’s request must be in writing, must set out the details of the change sought and the reasons for the requested change.  The employer must then respond to the employee in writing within 21 days.  A request can only be refused on reasonable business grounds.  A refusal must include the reasons for the employer’s refusal.

The reasonable business grounds on which a request for flexible working arrangements can be refused include:

  • that the new arrangement would be too costly for the employer;
  • that there is no capacity to change other employees’ arrangements to accommodate those requested by the employee;
  • that it would be impracticable to change the arrangements of other employees, or recruit new employees, to accommodate those requested by the employee;
  • that the arrangements requested by the employee would be likely to result in a significant loss in efficiency or productivity;
  • that the arrangements requested by the employee would be likely to have a significant impact on customer service.

If an Award, enterprise agreement or, less often, an employment contract allows workplace disputes to be taken to the Fair Work Commission, an employer who refuses a request may find itself before the Commission if the employee disagrees with the refusal.  Further, if an employee feels discriminated against because of a refusal, he or she may challenge the employer under relevant discrimination legislation.

At Everingham Solomons, we provide guidance to both employers and employees in managing requests for flexible working arrangements because Helping You is Our Business.

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Confidentiality and Workplace Investigations

KXBbwA asked his colleague B (a long term employee and union delegate at their workplace) to be his support person during an investigation process being conducted by their employer.  A gave B a copy of a letter A had received from the employer.  The letter referred to the confidential nature of the investigation being undertaken.  B responded to that letter to the employer on behalf of A and provided a copy of the letter and his response to the union, and to other members of his work group at the workplace.

The employer was not impressed with B, who later acknowledged and apologised for the breach of confidentiality as a support person but said he was not aware of his confidentiality obligations.  The employer then issued B with a final written warning.

The union applied to the Fair Work Commission (FWC) on B’s behalf, submitting that the final written warning was harsh and disproportionate in all the circumstances, and should be removed from B’s employment record.  The employer said that it had considered summarily dismissing B for serious misconduct but had settled on the lesser disciplinary measure of a final written warning.

The FWC held that:

“Any person in that role of support person should understand an investigation into issues to do with an employee’s work performance or behaviour are private matters between the parties, and the confidentiality of those processes should be respected at all times”.

Nevertheless, the FWC held that the decision to issue B with a final written warning was harsh and warranted review.  Relevant factors were:

  • B’s role as union delegate meant he should know better but also that he had an active role to play for employees in that workplace;
  • there was little in the letter B circulated that was truly confidential;
  • B was a long term employee (over 11 years) with a clean disciplinary record;
  • B did not act intentionally or maliciously to damage the employer.

The FWC ruled that B’s final written warning should be downgraded to a written warning only.  The FWC “emphasised that it is to be expected the parties involved in issues to do with individual employee disciplinary processes will respect the confidentiality and privacy of those processes”.

For employers, a lesson is to ensure that, when an employee requests a colleague as a support person, the colleague is clearly informed of the strict confidentiality of the process and then disciplinary measures can result if that confidence is breached.  When an external support person is brought in, an employer may wish to request that person sign a brief confidentiality undertaking (even if just to re-emphasise the confidentiality of that process).

At Everingham Solomons, we have the resources and expertise to assist with issues in your workplace because Helping You is Our Business.

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How Is Your Registered Office Functioning?

KXBbwAs is well known, the consequences of allowing a statutory demand served on a company to expire can be severe.  First of all, under the Corporations Act, a presumption of insolvency arises against that company.  Secondly, an application brought by the company after expiry to set aside the statutory demand on the grounds of a genuine dispute as to the relevant debt will be incompetent and is liable to be dismissed.  Thirdly, the creditor is then able to proceed with an application to wind up the company.

Problems relating to the expiry of statutory demands or other important notices, such as Director Penalty Notices issued by the Australian Taxation Office, arise frequently when a company’s external registered office (often its accountant’s office) has inadequate procedures in place to: collect mail received at the address it nominates for its clients’ registered offices; record the date that correspondence and notices are received; and then pass the correspondence and notices to clients in a prompt fashion.

A problem of that kind arose In the Matter of Futre Developments Pty Limited [2014] NSWSC 1712.  In order to be able to proceed with its application to set aside a statutory demand, Futre Developments had to satisfy the Supreme Court that its registered office had been served with the statutory demand on or after 18 September 2014.  In that way, its application filed on 9 October 2014 to set aside the statutory demand would not have expired (being within 21 days after service of the statutory demand).  The creditor asserted that service of the statutory demand occurred on 17 September 2014, which was supported by Australia Post’s records.

If the creditor was correct, the application to set aside would have been out of time.  Futre Development’s accountant, who maintained the registered office for that company, gave evidence of his usual mail delivery, collection and opening processes.  His evidence was that he had opened the envelope containing the statutory demand on 19 September 2014 and that he stamped it as received that day.  His evidence was that the earliest it could have been received at his office’s  letterbox was 18 September 2014.

Under scrutiny during cross examination, however, the accountant’s system for delivering proper registered office services did not hold up.  Some mail came to be delivered to his letterbox and some to his PO Box but it was not clear which occurred in this instance.  The accountant could not be sure that he attended the office on 18 September 2014 at all and his calendar did not clear matters up.  Thus, the mail collected by him on 19 September 2014 could have been there on 17 September 2014, as asserted by the creditor.

The best evidence available to the Court, therefore, was that the statutory demand had been served on Futre Developments’ registered office maintained by its accountant on 17 September 2014.  Futre Developments’ application to set aside the statutory demand was therefore out of time.  Its application was dismissed and it had to pay the creditor’s costs.   To avoid being wound up by the creditor, it would then have had to pay the amount demanded.

The case is a lesson for companies that maintain an external registered office with their accountant, solicitor or some other person.  The procedures in place at the registered office to collect and receipt important correspondence and notices on a daily basis, and then promptly bring those to the attention of clients, must be of the highest order.  Companies should enquire about the procedures in place at their registered offices and be satisfied that correspondence and notices sent there are dealt with appropriately.  For the accountants, solicitors and others whose premises are nominated as their clients’ registered offices, there is a degree of risk involved in that role but also the opportunity to provide an additional quality service to clients, and to be the first informed when issues arise for clients that require additional advice and assistance.

At Everingham Solomons, our Commercial and Dispute Resolution teams are well equipped to advise you on corporate governance issues and to promptly address problems such as that experienced by Futre Developments when they arise because Helping You is Our Business.

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Oppression of Shareholders

KXBbwBusiness people regularly come together as shareholders of a new or existing company to advance a joint venture.  Mostly, things go smoothly and the relationship is mutually beneficial.  There are times, however, when relationships sour (mostly over money) and the company comes to be dominated by one or two individuals.  The less dominant shareholders can find the company’s affairs being run contrary to the interest of the shareholders as a whole or in a manner that is oppressive to, unfairly prejudicial to, or unfairly discriminatory against those shareholders.  What to do?

The Corporations Act 2001 (Cth) contains provisions that allow shareholders who find themselves in this position, and without other options to resolve matters, to seek a range of orders through the relevant Court.  For example, the Court can modify or repeal the company’s constitution.  The Court can make orders regulating the company’s affairs.  It can order one party to buy out another’s shares.  It can restrain a person from engaging in certain conduct and it can require a person to do a certain act.  In the worst cases, the Court can order the company to be wound up and a liquidator appointed.

Of course, seeking orders from the Court comes with stress, inconvenience and significant cost.  At Everingham Solomons, we prefer our clients to take steps at the outset of their joint venture to talk with their joint venture partners about what will happen if a dispute arises and how such a dispute will be resolved.  Dispute resolution mechanisms can be built in to a company’s constitution or a joint venture agreement that take the parties through informal settlement steps, a mediation and/or an arbitration before taking the option of seeking relief from the Court.  With the help of a trained mediator and/or arbitrator, this can often see disputes resolved cheaply and efficiently or, if not, a plan developed for the parties to part ways without loss or future acrimony.

We have the expertise at Everingham Solomons to smooth your entry into business and your exit because Helping You is Our Business.

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Personal Property what?

KXBbwMany businesses gloss over the Personal Property Securities Act 2009 (Cth) (PPSA). How is it relevant to my business? Doesn’t it have something to do with people’s personal property – their furniture, TVs, iPads, watches and the like?

In fact, the PPSA is more relevant to the property of businesses than it is to the goods used in people’s households for domestic use. Personal property is essentially all property except for land and items affixed to the land. It includes the plant and machinery of a business, and its inventory. It includes the crops and livestock of a farming business. Personal property can include more intangible items like intellectual property, shares and accounts.

Essentially, the PPSA allows the holder of a security interest in personal property that is in the hands of another to register that interest on the Personal Property Securities Register (PPSR) and protect that interest against the world at large.

Take the example of Jane’s Jewellery Store. To get her business started, Jane borrowed from XYZ Bank and, to secure that loan, Jane gave a charge to XYZ over the whole of the business. XYZ promptly registered its charge over the business as a security interest on the PPSR.

Jane’s carpenter friend, Adam, supplied and fitted some new cabinetry in the jewellery store. Jane could not pay, so Adam said that he would proceed with the work but retain title to the cabinetry until Jane paid him. Adam did not register a security interest in the cabinetry on the PPSR against Jane’s business.

Jane’s jewellery designer friend, Mary, supplied items of jewellery on consignment to Jane for sale in the store. John rented a cash register, a computer and a safe to Jane. Neither Mary nor John registered their security interests on the PPSR against Jane’s business.

Months later, Jane’s cash resources dried up, and she was forced to put her business into liquidation. XYZ, the only party with a registered security interest, took possession of all the personal property within the business and sold it to repay the debt owed by Jane. By failing to register their security interests over the personal property they had supplied, each of Adam, Mary and John surrendered their security interests to Jane’s Jewellery Store on its liquidation and the priority security interest of XYZ prevailed. Adam, Mary and John were left only with money claims against an insolvent business.

If you can see yourself in this scenario, contact us at Everingham Solomons for personalised advice because Helping You is Our Business.

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What is in your “too hard” or “rainy day” basket?

KXBbwWe often have a business client or an individual come to see us with one or more mystery notices from the Australian Taxation Office, their bank or their creditors.  The notices contain lots of small print, intimidating language and tight deadlines for action.  Too often, days or even weeks have passed before we see the notices because they have been sent to the client’s accountant initially, which ís commonly the registered office for the company behind the business, or the client’s tax agent.  Or, quite frequently as well, the notices have arrived and been put straight in the client’s “too hard” or “rainy day” basket.

The notices turn out to be Director Penalty Notices from the ATO (a precursor notice to directors of a company that the ATO intends to recover from them personally the company’s PAYG withholding and/or SGC liabilities), a formal demand from the bank before possession action is taken regarding mortgaged property, or a creditor’s statutory demand for payment of a debt.  With the latter type of notice, the company behind the business will be presumed to be insolvent if the demand is not dealt with in the 21 day period.  That can lead to winding up proceedings being brought against the company.

In short, these types of notices are serious and need to be actioned as soon as they are received.  Advice from experienced professionals should be sought and lines of communication opened with the party that has issued the notice.  Otherwise, the future of the business, the company or individual behind it, and the personal assets of the company’s directors can be put at risk.

Keep those “too hard” and “rainy day” baskets empty, and ensure you have a good understanding with the registered office for your company to get such notices to you as soon as possible.

There is always a solution that can be fashioned if such notices are acted on early and proactively. At Everingham Solomons we will work with you to find the solution because Helping You is Our Business.

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