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Privacy Law and Policy Reporter
Part 1 of the article appeared in the previous issue of PLPR and covered employee surveillance and emails —General Editor.
It is argued by many employers that the employer’s duty of care positively obliges them to take preventative measures to head off the possibility of litigation. Significant legal obligations fall upon all employers, but especially mining and manufacturing employers. The list of such laws is extensive; some examples are occupational health and safety and anti-discrimination legislation. There are equivalents to these laws in all the States and Territories.
The physical safety of employees will not be limited to activities which are strictly considered to be work activities. Off duty and/or recreational activities can also be regarded — in some circumstances — as involving employer liability. The principal authority regarding the scope of the term ‘course of employment’ in workers compensation law is the decision of the High Court in Hatzimanolis v ANI Corp (1992) 173 CLR 473. That decision resulted in a finding that an off duty Sunday excursion conducted under the auspices of the worker’s supervisor in a remote location which led to a vehicle accident and the injury of the worker was a compensable injury.
Apart from these issues of personal and physical wellbeing, other legislation may also expose employers to significant damages actions. The most notable of these is the legislation which governs sex and racial discrimination and, in particular, sexual harassment. Communications (especially email) which contain sexually offensive material raise significant problems for employers. Sex discrimination legislation typically makes employers vicariously liable for sexual harassment.
The issue of random drug testing of employees came squarely before an industrial tribunal in BHP Iron Ore Pty Ltd v Construction, Mining, Energy, Timberyards Sawmills and Woodworkers Union of Australia Western Australian Branch  Western Australian Industrial Relations Commission 130 (WAIRC) (19 June 1998). A program of random drug testing was proposed by BHP after extensive discussion with unions and employees but met with the strident opposition of one of the largest unions at the site, the CFMEU. In the absence of consensus, BHP submitted its program to the WAIRC for approval.
The controversial element of the scheme which attracted opposition was summarised succinctly by the Commission as follows:
The most controversial aspect of the Programme is that part which involves testing for drugs. In essence, the Programme requires that an employee, as a condition of employment, submit to random testing of a sample of the employee’s urine. If such a test proves positive the employee concerned, on the first occasion, is liable to be sent home on paid special leave; on a second occasion within a period of two years, is liable to be sent home on unpaid special leave; and on the third occasion within the same period, further employment of the employee with the Company will be the subject of discussions.
It will be noted that the consequences of a positive test are relatively benign in that three positive tests within a two year period are necessary before dismissal is in prospect.
BHP argued that the program was necessary to enable it to satisfy its obligations under the Mines Safety and Inspection Act 1994 (WA) and the Regulations, and to enable it to satisfy its common law duty to provide its employees with a safe workplace. The Mines Safety and Inspection Regulations 1995 (WA) prohibit anyone from being in or on a mine while the person is adversely affected by intoxicating liquor or drugs. They entitle a mine manager or supervisor to direct any employee reporting for duty who, in their opinion, is adversely affected by intoxicating liquor or drugs to leave the mine immediately (reg 4.7).
It was conceded that the proposed drug tests were not a test of impairment, but BHPargued that the ‘cut off’ levels of drugs allowed under the program before a positive result is returned are at such levels that a positive result is a good indicator of there being a real risk of impairment. This was a critical feature of the program as it substantially raised the levels for a positive test result for marijuana. This was in excess of Australian Standard AS4305-1995 and blunted the attack that occasional casual marijuana use might be detected and used against the employee.
BHP acknowledged the privacy concerns raised by the CFMEU and pointed to strict security measures designed to avoid publication of any test result and any other information given as part of the program, including information regarding prescription drugs.
The sequel to the BHP case was Australian Railway Union of Workers, West Australian Branch and Ors v West Australian Government Railways Commission WAIRC Beech C, 20 January 1999. In this case Westrail, the railway authority in Western Australia, sought Commission approval for aspects of its random drug testing policy. The Railway Workers’ Union complained about the extent and nature of the drug testing regime.
Commissioner Beech, who was a member of the Full Commission in the BHP case, gave the Commission’s approval to the proposed scheme of random drug testing to be undertaken by Westrail, but was careful to warn that this did not amount to a general precedent for the use of random drug testing in the workplace. Once again the statutory obligations upon Westrail and its general duty to provide duty of care to ensure a safe working environment were powerful considerations in the Commission’s approval of the drug testing scheme.
Commissioner Beech indicated that the conclusions drawn in the BHP case were applicable in the Westrail case. Space here does not allow a detailed analysis of the decision but those who are interested would be well advised to obtain and read Commissioner Beech’s decision. It is important to note that whereas the BHP system required the presence of a level 100 ug/L canabanoids, the Australian Standard only required 50 ug/L and this was a feature of the Westrail system. The Commission was not prepared to intervene to require Westrail to raise the cut-off level to 100 ug/L. The decision seems to indicate that if the unions had called more evidence on this point the application may have been entertained by the Commission.
It is also worthwhile noting that there were safeguards provided for employees who returned a positive test; in other words, there was no automatic dismissal for employees who returned a positive test. (Although an employee who attended work who was obviously impaired would have always run the risk of being dealt with for misconduct.)
Some sense of the different and pervasive culture of drug testing in the US may be obtained from a recent US decision. Exxon Corp v Esso Workers Union US Ct App 1st Circuit [per Selya Ciffin Cyr JJ] (July 8 1997) set aside an arbitrator’s award which reinstated an Exxon employee who tested positive for drugs. In an admittedly different regulatory context, the Appeals Court stressed the overwhelming public policy in the maintenance and observance of drug testing for employees in ‘safety sensitive’ positions. The Court said:
We conclude, therefore, that the well defined and dominant public policy which we have identified does not require an employer to await the occurrence of an accident before discharging an employee who tests positive for drug use. In this sense, the public policy is not as closely cabined as the union implies. It is the union’s failure to recognize this aspect — and, thus, to appreciate the full breadth of the discerned public policy — that is fatal to its argument and crucial to our decision.
Contrary to the sentiment expressed by the Federal Court, a recent report issued by the American Civil Liberties Union, Drug Testing: A Bad Investment September 1999 (available on the ACLU website at <www.aclu.org>) offers the most trenchant critique of drug testing yet published. It points to the fact that the American Academy of Science itself has issued a report questioning the utility of efficacy of random drug testing.
The report observes that despite the fact that random drug testing has been implemented on a widespread basis in the US, very few employers have actually evaluated the effect of this in their drug testing program. This disturbing revelation emerged in a 1996 survey undertaken by the American Management Association which found that only 8 per cent of companies with drug testing programs have performed any kind of cost benefit analysis, notwithstanding the massive cost involved in these programs in the US.
The ACLU points to the fact that among the strongest promoters of drug testing have been the actual vendors of drug testing products and services. This has become a multibillion dollar industry throughout the world and, not surprisingly, the commercial interests involved are powerful.
The ACLU report restates the numerous criticisms made of drug testing regimes. Perhaps the most important criticism is the fact that because it takes several hours for drug metabolites to appear in urine, drug tests may miss drug users who are under the influence of drugs at the time the test is given because they have recently self-administered the drug. The report points out that if drug related impairment is the employer’s primary concern, the drug testing is both ‘an over inclusive and under inclusive strategy’.
The massive costs involved in administering a drug testing program are discussed in detail in the report. The substantial cost combined with the doubtful results and the extraordinarily intrusive nature of requiring employees to give urine samples — which many employees understandably find to be degrading and demeaning — must raise serious questions about the desirability and continued futility of random drug testing.
It may be observed, however, in the light of recent publicity about DNA testing in NSW, that technology may provide the answer to the overly intrusive methods currently used as part of random drug testing schemes. It appears that DNA testing can now be adequately performed by testing saliva on a swab, similar to a cotton bud, taken from the inside of the mouth. Apparently drug tests can also be taken by this means although the costs would, at the present stage of technology, far outweigh the costs of a urine sample — not to mention the added advantage of an almost instantaneous preliminary result provided by a urine sample.
No doubt further developments in technology will provide answers to these particular problems and in a relatively short space of time. Such drug testing as has to occur will be undertaken by this means and not by the more intrusive means of collection of a urine sample. That may well have the effect of delaying the substantial concerns that have been voiced by many about the physical intrusion involved in random drug testing. Of course it will not address the other privacy concerns, in particular the creation of a record and the use and possible abuse of that record in the future.
Two recent decisions of the Australian Industrial Relations Commission (AIRC) indicate that the Australian approach is likely to be more sympathetic to employees. They illustrate the fact that it is one thing to introduce a drug testing regime, and an entirely different thing to implement it. The first of the cases considered is the decision of Commis-sioner Raffaelli in James Charles Debono v TransAdelaide 1031/99 S Print R8699 (7 September 1999).
Mr Debono was involved in a fatal accident involving a pedestrian at or near a level crossing in Adelaide in October 1998. It was accepted by his employer TransAdelaide that the accident was not caused in any way by any fault or carelessness on the part of Mr Debono. Following the accident Mr Debono was required to undertake drug and alcohol testing, which he did.
Mr Debono tested negative to alcohol but the result of a urine test returned a positive reading to marijuana.
Mr Debono offered no explanation for the presence in his urine of marijuana. He later suggested that he may have ingested some marijuana after finishing work at a post grand final party. TransAdelaide decided to dismiss Mr Debono.
Under the version of the drug testing policy said to be applicable by Transadelaide, a positive test result for marijuana was ‘deemed’ to be impairment in accordance with draft alcohol and drug policy. The employer (a significant public authority) argued that it had been brought into public disrepute by the publicity associated with the accident.
There was a degree of confusion regarding the status of the drug testing policy. The policy containing the deeming provisions had not achieved the status of finality. The draft policy was not applicable policy at the time of the incident. The employee argued that he was unaware of the ‘deeming’ policy.
The Commissioner reached no conclusion as to whether the draft policy was a relevant policy, but held that the drug and alcohol policy was not unreasonable. He was satisfied that Mr Debono was not aware of the ‘deeming’ policy. The ‘deeming’ aspect of the policy represented a radical change to the drug policy. In these circumstances, the mere display of the policy on employers noticeboard was an insufficient means of bringing it to the notice of all TransAdelaide employees. It was not reasonable to conclude that the policy was known to all TransAdelaide employees.
In the circumstances of the case, the Commissioner held that there was no valid reason for the dismissal of Mr Debono (as per Selvechandram v Peteron Plastics Pty Ltd (1995-6) 62 IR 371). He observed that Mr Debono was not responsible for the adverse public reaction to the accident. Mr Debono was reinstated; however, he was awarded a lesser amount of backpay because he had not been fully frank with his employer in the disciplinary interview immediately after the incident. (See Mollinger and National Jet Systems 1130/98 N Print Q5911 (11 December 1997) and s 170CA(2) of the Workplace Relations Act 1996 (Cth).) Mr Debono received $15,000 backpay.
Note that the positive test was consistent not with the driver’s actual impairment, but only with the fact that he had apparently consumed marijuana some days prior to the accident.
Another recent decision in a similar vein was that of Worden v Diamond Offshore General Company 1255/99 DPrint S0242 (18 October 1999). In this case Commissioner Eames held that the dismissal of the employee concerned was unfair.
The Commissioner observed that over some years, in spite of the employer’s stated attitude about its drug policy, there was no evidence that it had in fact conducted any random drug testing. There was also evidence that some persons (including the applicant), who had tested positive in pre-employment medicals, were nevertheless employed, and worked on the oil rigs. The Commissioner accepted that the policy was hardly enforced.
In a case which involved possession of drugs but not drug testing, an employee dismissed by Qantas was reinstated. In Hibbard v Qantas 1426/96 Print N6043 (29 November 1996) a Qantas maintenance employee was dismissed after a small packet containing marijuana fell out of his pocket when he was retrieving a parking ticket. Deputy President Drake said:
Mere inadvertence and stupidity caused the Applicant to have the prohibited substance in his possession on the occasion when it was discovered and there is no evidence of any deliberate intention to bring it onto the base.
(See also Scott McEwan Linn v Personal Touch Caterers  WAIRComm 12 (23 January 1998); Hall v Ulan Mines 710/98 SPrint Q2174 (22 June 1998)).
The lessons which may be learned from this case include the following.
The extent to which an employer may intrude into employee’s ‘out of hours’ conduct was considered recently in an important decision of the AIRC. In Rose v Telstra (unreported, AIRC, Vice President Ross, 4 December 1998 Print Q9292). The application was an ‘unfair dismissal’ case under s 170CE of theWorkplace Relations Act 1996 (Cth). The decision is the most thorough discussion in any Australian jurisdiction (and so far as the author is aware, anywhere) of the issue of out of hours conduct and employees’ and employers’ respective rights and obligations.
The termination of Mr Rose’s employment arose out of an incident which took place in the early hours of Friday, 14 November 1997. Rose, a Telstra technician, was staying with another Telstra employee while on assignment in Armidale NSW. He became involved in a fight with his Telstra colleague after a night of drinking at the hotel where they were staying. The police were called and Mr Rose’s colleague was taken into custody. At the time of the incident neither Mr Rose nor his colleague were in their Telstra uniforms, nor were they ‘on call’.
The owner of the hotel where the men stayed was aware that they were Telstra employees. The court listing in respect of the criminal charges against Mr Rose’s colleague appeared in the local paper. Apart from that, there was no other adverse publicity in respect of the incident.
On 1 April 1998 Mr Rose was advised that he had been found guilty of improper conduct and his employment was terminated. A subsequent appeal to the Disciplinary Appeals Board confirmed his termination. No disciplinary action was instituted against his colleague who was ultimately convicted of malicious wounding and sentenced to four months imprisonment, and who then resigned his employment with Telstra. There had been previous altercations between Mr Rose and his colleague. The colleague had later been re-employed by Telstra.
Telstra had distributed to all its employees a document entitled ‘Our Company Values and Our Code of Conduct’. Under the heading ‘Outside Employment and Other Activities’ the Code states:
We should avoid outside activity likely to affect adversely either our work or someone else’s (for example, in terms of occupational health and safety), or which could discredit either ourselves or our Company, or which could conflict with the Company interests.
There was no suggestion, however, that conduct in breach of the Code would lead to dismissal.
Vice President Ross observed that the shift in the nature of the employment relationship since the last century has implications for an employer’s capacity to discipline an employee in respect of out of work conduct. In earlier times the relationship of master and servant was pervasive, but this is no longer the case. The modern law of employment has its basis on contract and an employee’s behaviour outside of working hours will only have an impact on their employment to the extent that it can be said to breach an express or implied term of his or her contract of employment.
The shift in the nature of the employment relationship, from status to contract, has led to the limitation of the circumstances in which out of hours conduct may result in adverse consequences for a person’s employment. Those limited circumstances are:
His Honour summarised this as ‘[i]n essence the conduct complained of must be of such gravity or importance as to indicate a rejection or repudiation of the employment contract by the employee’ [para 30].
Without such considerations an employer has no right to control or regulate an employee’s out of hours conduct. Ross VP indicted that he agreed with the earlier observation of Finn J in McManus v Scott-Charlton:
I am mindful of the caution that should be exercised when any extension is made to the supervision allowed an employer over the private activities of an employee. It needs to be carefully contained and fully justified: (1996) 140 ALR 625 at 636.
In McManus v Scott-Charlton Finn J concluded that it was lawful for an employer to give an employee a direction to prevent the repetition of privately engaged-in sexual harassment of a co-employee where:
(i) that harassment can reasonably be said to be a consequence of the relationship of the parties as co-employees (that is, it is employment related); and
(ii) the harassment has had and continues to have substantial and adverse effects on workplace relations, workplace perform-ance and/or the ‘efficient equitable and proper conduct’ (cf PS Act, s 6) of the employer’s business because of the proximity of the harasser and the harassed person in the workplace (at 637).
It is important to recognise that the lawfulness of the direction given by the employer was dependent on the fact that the employee’s out of work conduct had a demonstrated, substantial and adverse effect on the employer’s business.
Applying these tests, Ross VP concluded that Mr Rose’s conduct on the night in question lacked the requisite connection to his employment and therefore it did not provide a valid reason for his termination. The incident in question took place outside of working hours. At the relevant time neither Mr Rose nor Mr Mitchell were in their Telstra uniforms, nor were they ‘on call’. The incident did not take place in what could be regarded as a public place but rather inside a hotel room that the men shared. Ross VP said that there was simply no evidence to support that claim that it had tarnished the public perception of Telstra employees and discredited the Telstra organisation.
Ross VP concluded with the following observation:
I do not doubt that the applicant’s behaviour on 14 November 1997 was foolish and an error of judgment. He made a mistake. But employers do not have an unfettered right to sit in judgment on the out of work behaviour of their employees. An employee is entitled to a private life. The circumstances in which an employee may be validly terminated because of their conduct outside work are limited. The facts of this case do not fall within those limited circumstances.
No discussion of employee privacy interests would be complete without at least passing mention of recent developments in employee references. Although the law in Australia has had no occasion yet to consider this issue, in Spring v Guardian Assurance (1995) 2 AC 296, a decision of the British House of Lords dated 7 July 1994 marked what has been described as ‘a major extension of employer liability, and a corresponding increase in the legal protection of employee interests’.
Spring was a sales director with Guardian Assurance, an insurance firm. He was dismissed following a corporate reorganisation. He then sought employment with Scottish Amicable, another insurance firm. Under the insurance industry’s regulations, an insurance company could not appoint anyone to act as a company representative without obtaining a reference about that person’s character and experience. Scottish Amicable requested a reference from Guardian.
Guardian’s reference stated that Spring was ‘a man of little or no integrity and could not be regarded as honest’; he ‘consistently kept the best leads to himself with little regard for the sales team that he supposedly was to manage’, and he left the company ‘owing some £12,000 in funding which to date has not been repaid’. Not surprisingly, Spring did not receive the position with Scottish Amicable.
In a decision in favour of Spring, the House of Lords (by majority) held that it was appropriate to find that an employer providing a reference to an employee owed the latter a duty of care in preparing the reference. The Court based this conclusion on the fact that the relationship between the parties was one in which the employer had, in effect, assumed a responsibility towards the employee, and the latter had relied on the employer to carry out that responsibility with due care and skill:
The employer is possessed of special knowledge, derived from his experience of the employee’s character, skill and diligence in the performance of his duties while working for the employer. The provision of such references is a service regularly provided by employers to their employees; indeed, references are part of the currency of the modern employment market. Furthermore, when such a reference is provided by an employer, it is plain that the employee relies upon him or her to exercise due skill and care in the preparation of the reference before making it available to the third party.
As though this were not complicated enough, a recent US decision held that in certain circumstances, an employer had a duty to a future employee to warn about a former employee’s conduct. The decision of the Californian Supreme Court in Randi W v Muroc Joint Unified School District illustrates the dangers or providing a favourable letter of reference when this is not the true story.
In Randi, the former employer, a school board, provided a positive, unqualified letter of reference indicating that the former employee was able to work well in a school environment, and that he was an ‘upbeat, enthusiastic administrator who relates well to the students’. Significantly, the letter of reference failed to mention that the former employee had been disciplined for sexual misconduct with female students, which led to his forced resignation. After being hired by another school, the employee molested another child.
The Californian Supreme Court held that the former employer had a duty to prospective employers and to third parties to provide a complete and accurate job reference when (a) the employer chooses to provide a sub-stantive job reference and (b) there is a substantial and foreseeable risk that a person could be exposed to physical injury because of incomplete or misleading information in the reference. A letter of reference which describes a former employee’s strengths but fails to disclose any relevent negative attributes may subject the former employer to liability for negligent misrepresentation. The scope of this article does not permit a more elaborate discussion of this topic.
The issue in Spring arose again recently in a decision of the Court of Appeal in Bartholomew v London Borough of Hackney  IRLR 246. That case has now propounded three points of general principle regarding references.
There is no reason why these consider-ations should not equally apply to web based recruitment. While self-selected material displayed on the web is hardly likely to contain defamatory material of the subject, the issues raised in Randi’s case are likely to have continuing relevance. Where the ‘puffing’ of an employee’s qualities borders on misrepresentation or otherwise fails to disclose relevant material, there may be a basis for redress against the service promoter.
This short survey of the variety of privacy intrusive employment practices shows that these are on the increase. There is no doubt about the fact that the legal regulation of many of these privacy invasive practices falls far short of what is desirable. At least in NSW some of these issues have received the attention that they deserve.
As suggested above, it may be that the very rapidity of developments in technology which has produced the present threats to privacy will, in time, throw up some solutions to the issue of physical intrusions.
In the meantime, it is possible to suggest that an international consensus has emerged regarding the need, from a human and industrial relations standpoint, for transparent employee surveillance policies, consistently applied and clearly understood sanctions where those policies are breached. The American Management Association suggests:
To ensure effective and fair monitoring policies, AMA strongly recommends that companies create clearly stated and broadly understood policies on this subject ... The association recommends that electronic monitoring policies be clearly defined and disseminated to all employees through all communication channels. The subject of electronic monitoring should be addressed in recruitment, orientation, and training programs. AMA also suggests that surveillance be illustrated through specific examples of misuse during training sessions, so that employees know what is unacceptable.
One caveat may be added to that statement of principle. Employees (and their unions) should be consulted about the implementation of these policies. The policies should be sensitive to genuine expectations regarding employee privacy and policies should be regularly reviewed to ensure that they remain relevant. Measures should be implemented to provide a meaningful level of assurance regarding the auditing of access to and use of, personal information.
Jim Nolan is a barrister specialising in industrial law at Denman Chambers, Sydney, and was formerly Executive Member of the NSW Privacy Committee in the 1980s. This article was originally presented at an IIP Conference in Sydney under the title ‘Employee rights in the electronic workplace – some aspects of employee privacy in the electronic age’.