PaperCut case puts hybrid-work policy back in the spotlight

Why precision, clarity and avoiding ambiguity can ensure organisations avoid the “Westpac effect” following the national bank’s loss in an unfair dismissal case last year.

Earlier this month, in the case Mr Richard Johnson v PaperCut Software Pty Ltd, Johnson – who worked at Victorian software provider PaperCut Software – was terminated after he claimed that a return-to-office directive was a breach of his contract of employment. At his unfair dismissal hearing, he had his application tossed after the Fair Work Commission found that he failed to comply with a workplace directive to work in-office three days per week – which the commission ruled as “lawful and reasonable”.

Contrastingly, in the landmark flexible work arrangement dispute case of Karlene Chandler v Westpac Banking Corporation last year, the Fair Work Commission heard that Chandler had requested to work from home or at a local branch two days a week so that she could care for, pick up and drop off her two young children from school, as opposed to travelling around 70 kilometres to the nearest NSW corporate branch.

In its decision, the commission ruled the case in Chandler’s favour, finding that the “consequences of not making an order [were] seriously prejudicial for the applicant and her family”, and she was thus granted her request for flexible work arrangements.

Dentons partner Paul O’Halloran said: “Generally, written employment contracts will contain an express provision that requires employees to comply with lawful and reasonable directions, or to work from a specific work location when directed to do so.”

“If an employee fails to comply with a lawful and reasonable direction to perform work in the office, they should be warned of the potential consequences of their failure, which could include termination of employment.”

PaperCut case v Westpac case

Aaron Goonrey, partner and head of employment and reward, APAC, at Pinsent Masons, said the PaperCut case illustrates the “hangover” that arises when past assurances clash with formal policy.

“When employees believe flexibility is an entitlement rather than a permitted condition, ambiguity becomes a risk multiplier. The precise wording of contracts is crucial, as is the application of hybrid work policies,” said Goonrey.

Elizabeth Aitken, partner and national head of workplace relations and safety at SLF Lawyers, said the outcome of the PaperCut case would have been different if the worker had a flexible work request on relevant grounds.

However, Swaab partner Michael Byrnes stated in light of the Westpac case: “Employees who are eligible to seek a flexible work arrangement under the Fair Work Act, particularly those with carer responsibilities, are best placed to argue an enforceable right to work from home.”

Goonrey said: “What ultimately protected [PaperCut] in this case wasn’t necessarily the policy itself, but the methodical and consistent way it was communicated, consulted on, staged and enforced.”

In addition, Goonrey said employers can require in-office attendance if they can demonstrate a business purpose and consultation, with a clear rationale linked to “operational reality”.

Aitken noted that in Westpac’s case, the Fair Work Commission did not consider it to have reasonably sufficient business grounds to overturn its employee’s right to work flexibly from home on a permanent basis.

“This push for greater flexibility doesn’t always align with the operational requirements and objectives of the employer,” Natasha Duff, special counsel at Kingston Reid, said.

According to Aitken, “the increasing volume of disputes in this area highlights an ongoing policy and governance gap in many workplaces, with flexibility arrangements evolving in practice faster than the policies that regulate them”.

Byrnes said: “These cases are becoming increasingly common as the latitude extended to employees to work from home in the aftermath of the COVID pandemic (when it was a necessity) comes to an end and employees are facing the prospect of needing to return to the office.”

Clear and unambiguous policies

Duff noted the impact the pandemic has had on how Australian workers think about WFH, with a common pitfall being the belief that WFH arrangements are an entitlement.

Byrnes also found that some employees who structured their lives around working from home believe that it is “something worth fighting to continue”, especially in the case of the decision for a return to the office appears to be capricious or lacking a sound rationale.

O’Halloran said the growing prevalence of flexible work disputes demonstrates the need for hybrid working policies that are clear, unambiguous, and reasonable.

“When employees begin relying on informal arrangements or verbal assurances, you can quickly move from ‘flexibility’ to ‘ambiguity’. From experience, it is the ambiguity where the legal risks for hybrid work models thrive,” Goonrey said.

“Policies on working from home should be clear and unambiguous. HR departments should also avoid arbitrary policies that are inflexible and don’t accommodate employees’ personal circumstances,” O’Halloran said.

‘Meaningful consultation’

“Where a policy is varied over time to reflect a change in business/operational needs, particularly if the variation could be perceived by some staff as less favourable or prejudicial to their own interests, it is important that there is appropriate consultation,” O’Halloran said.

Meaningful consultation is not optional but is an essential legal step, Goonrey stressed, in addition to establishing a workforce cultural phase in order to maintain employee trust, legitimacy and procedural fairness.

“Consultation means giving employees genuine notice of the proposed change, explaining the reasons for it, providing relevant information, inviting feedback, and genuinely considering that feedback before a final decision is made. It is sometimes misunderstood as simply announcing a change and calling it consultation,” Goonrey said.

Aitken said: “Where employers have clear, well-communicated flexibility policies and apply them consistently, the Fair Work Commission will generally support reasonable management action and reject unfair dismissal claims arising from an employee’s refusal to comply.”

Creating policy

Duff said: “As we are seeing in recent decisions such as [the PaperCut decision], it is critically important for employers to ensure that their contractual arrangements align with workplace attendance objectives, and permit flexibility around introducing changes to internal policy and procedure.”

“These matters should be carefully considered before issuing any direction, or taking disciplinary steps, regarding an employee’s return to the workplace.”

For employers to avoid disputes regarding hybrid work arrangements, O’Halloran suggested the implementation of “clear and unambiguous wording stating an employee may be required to work from a particular physical location at the discretion of the employer as directed … regardless of whether the contract expressly requires the employee to work from the office, or permits the employee to work from home”.

O’Halloran said employers also must “state that the location of work will be determined in accordance with the employer’s policies, and that employees are required to comply with all relevant policies”.