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The  Federal Court of Australia has ordered that Swinburne University pay a $14,000 penalty for contravening the Fair Work Act 2009 (the “Act”).

Swinburne University offered pre-university programs that they delivered through an organisational department known as Swinburne College (“SC”). A decision was made to transfer the functions and operations of Swinburne College to a new independently accredited and registered company Swinburne College Pty Limited (“SCPL”). It was intended that SCPL would employ new staff so as to avoid triggering the “transfer of business” provisions of the Act.

New teaching staff would have their employment conditions determined by the Educational Services (Post-Secondary Education) Award 2010 instead of the Victorian TAFE Teaching Staff Multi-Business Agreement 2009 (which applied to the employees in their employment with Swinburne University). Based on a comparative salary scale included in the proposal, significantly lower salaries were to be paid to staff under the Post-Secondary Award (in comparison with the enterprise agreement).

Section 340(1)(a)(i) of the Act prohibits an employer from taking or threatening to take adverse action which prejudicially alters the position of an employee because the employee is “entitled to the benefit of a workplace instrument”. In March 2015, the parties reached a settlement whereby Swinburne admitted its conduct in making and taking steps to establish SCPL and that transfer SC’s operations to SCPL amounted to a contravention of s 340(1)(i). The threatened conduct constituted a breach on the basis that there was an increased likelihood the employees’ positions would be made redundant, and a substantial and operative reason for the conduct was that Swinburne College employees were entitled to the benefit of an industrial instrument, namely the TAFE Multi-Business Agreement, whose operation Swinburne did not wish to perpetuate in the new SCPL.

In determining the penalty to be imposed under s 546 of the Act, Justice Mortimer considered the nature and seriousness of the conduct, noting firstly that the conduct amounted to a threat to take adverse action, rather than the taking of adverse action. Secondly, her honour acknowledged that in order to avoid the protective transfer provisions of the Act, Swinburne had adopted a carefully planned and considered plan involving senior people to employ new people, with the intended effect that employees who had been employed for long periods of time would lose their employment. Thirdly, Justice Mortimer highlighted the fact that Swinburne was a large institution, able to source experienced legal and industrial advice and was used to working with unions. Finally, her honour emphasised that given that Swinburne was recently found to be in contravention of the Act, there was a need for both specific and general deterrence. In particular, her honour noted the need for higher educational institutions to be put on notice of their obligations to employees when restructuring.

Lesson for Employers:

While it was recognised that implementing cost savings and creating a more favourable industrial landscape was a motivating factor for Swinburne, the decision demonstrates that employees must always carefully consider their obligations under the Act when restructuring, ensuring that their proposals do not adversely affect employees. Part of that process will often require adopting a transparent environment whereby employers consult and communicate such proposals to employees and unions.