Workplace mediation could have saved litigation costs: FWC rules worker unfairly sacked for refusing company-wide cut

When would a workplace situation benefit from a workplace mediation? According to Karen Streckfuss, a Senior Workplace Relations Advisor at iHR Australia, the best time to apply a mediation at the workplace is when a miscommunication happens and there is no proper process available on how to deal with the matter. This is before any serious allegations arise; of where there are issues to be resolved rather than that need to be investigated.

A recent Fair Work Commission case demonstrates how a mediation could have avoided the drain of both legal and penalty costs for a company that was ironically trying to cut down on its business costs. In its decision, the Commission found that a workplace training provider had unfairly dismissed the only employee who had refused its 10% pay reduction proposal.
The employer told the Commission that it had “suffered an unforeseen and significant reduction in revenue and a significant cash flow problem” last year and had avoided cutting labour costs for as long as it could, cutting expenditure in every other part of the business where possible.

Although reducing headcount appeared to be the company’s obvious solution to its financial difficulties, it was conscious that its staff needed their jobs in a tight labour market. Hence, the employer decided to hold meetings with its workforce across the country to communicate the offer of a voluntary, temporary 10% pay cut as an alternative to cutting jobs. The vast majority accepted the proposal, except for the one employee it dismissed.

In May this year, it was confirmed that the company had restored normal pay rates. According to FWC Deputy President Hamilton, refusal to accept a pay cut is not a valid reason for dismissal. He noted that the voluntary pay cut was a legitimate course of action to ease business pressures, further adding that this was the kind of measure that should be encouraged by the FWC. However, FWC noted in its decision that the employee had not been consulted since he was away on holiday at the time and did not have the benefit of a full explanation. When he returned to work from annual leave in January 2016, he was given a letter to advise him that he had only until the close of business the next day to agree to a 10% wage reduction or be terminated.

The deputy president added that the employer failed to treat the serious issue of a 10% reduction in pay for the employee in an appropriate manner. “The employer should have advised [him] of the problems that the company had, and provided other relevant details, as well as the opportunity to ask questions and consider the issue, and to respond. The employee was awarded two weeks’ pay in compensation or $3,259.70 gross.

As a workplace mediator with iHR Australia, Streckfuss adds “Mediation provides, sometimes for the first time, an opportunity to hear a version of events from someone else’s point of view. I have often heard parties say that they never ‘knew that’ or did not understand that the other party ‘perceived’ an issue that way. There needs to be a willingness to listen with an open mind”.

iHR Australia’s mediators are specialists in assisting parties from a range of organisations and industries to explore their conflict in depth, think about options, consider alternatives and decide on the best way to move forward in a controlled and safe environment. Clients rate our workplace mediation services first class – both responsive and professional in manner and documentation. We understand that disputes can involve people responding emotionally to sensitive issues. Accordingly, iHR Australia’s approach to mediation is consultative and tailored for each situation.

iHR Australia also offers workplace mediator training where our expert Senior Workplace Relations Advisor will guide participants through the key principles of conducting an effective workplace mediation, focusing on best practice process and effective mediation skills. Our unique Workplace Reality Theatre allows participants to observe relevant and engaging scenarios from real-life mediations for group discussions.