Elon Musk runs afoul of protections for union employees

By Andrew Piper and Lindsay Carroll, NRA Legal

The CEO of Tesla may seem to live in a different world from the rest of us – rockets, driverless cars and all – but it sometimes helps to be reminded that even the likes of Elon Musk are not free from the IR issues that all businesses must navigate.

This was illustrated by a recent decision of the US National Labor Relations Board upholding a 2019 ruling that the company had illegally fired a worker for engaging in union activities, with the Board ordering that the worker be reinstated and receive backpay for lost earnings.

While the exploits of Elon Musk almost inevitably make for good reading, this incident also serves as a useful reminder concerning what protections employees in Australia have for engaging in union activities.

 

Fired for being a unionist

Prior to his dismissal in October 2017, Richard Ortiz became quite visible as a union organiser within Tesla. He would hand out leaflets to other employees in the Tesla company parking lots to promote union membership.

In defending the dismissal of Mr Ortiz, Tesla argued that Mr Ortiz was terminated from his employment because he posted screenshots of employee profiles from an internal Tesla platform to Facebook. However, it was found by the Board that the true reason for the dismissal was Mr Ortiz’s industrial activities on behalf of the union at his workplace, which included these social media activities.

The situation was not helped when, in May 2018, Mr Musk further demonstrated his fraught relationship with the unions by tweeting “why pay union dues & give up stock options for nothing?”, as this also featured in the case as an attempt to coerce employees into not joining a union.

 

The Australian perspective

Section 346 of the Fair Work Act 2009 (Cth) (FW Act) prohibits an employer from taking “adverse action” against an employee because of the employee’s “industrial activities”.

“Adverse action” is a very broad term which, at its most obvious, includes dismissing an employee, but also includes harming the employee in their employment in any way, whether financially (such as not offering shifts) or non-financially (such as giving the employee embarrassing or denigrating duties).

Alongside the protection against adverse action, the FW Act also provides protections against employers coercing employees to not engage in industrial activities, or misrepresenting the rights of their employees.

“Industrial activity” is also an expression with very broad meaning under the FW Act, and includes (but is not limited to):

  • establishing a union;
  • being a member or officer of a union;
  • organising or promoting the activities of the union; and
  • representing or advancing the views of the union.

Had this dismissal occurred in Australia, Mr Ortiz could have made a “general protections” application to the Fair Work Commission (FWC) alleging that he was dismissed in contravention of the protection provided by s.346 of the FW Act. Provided that he did so within 21 days of being dismissed, the FWC would conciliate the claim; if the matter didn’t settle, it would normally be referred to the Federal Circuit Court for a binding determination, however the FWC can also arbitrate such claims if the parties consent.

Several of Mr Ortiz’s activities – being involved in a union as an organiser, distributing leaflets, and wearing union t-shirts – would fall squarely within the meaning of “industrial activities” under the FW Act.

If the FWC or the court went on to find that Mr Ortiz was dismissed because of this activity, consideration would turn to the appropriate compensation for the dismissal. Both the FWC and the court have the power to order compensation for lost wages and, if appropriate, reinstatement; importantly for claims of this nature, the amount of compensation that can be awarded is unlimited.

Additionally, the court (but not the FWC) has the power to order that the employer pay a pecuniary penalty for the contravention of s.346. These penalties can be up to $66,600 for a corporation and $13,320 for the individual decision maker.

Mr Ortiz – or indeed, any other member of the Tesla workforce, or even the Fair Work Ombudsman – could also have commenced legal proceedings directly against Mr Musk for his tweet, if it amounted to an attempt to coerce employees to not engage in industrial activities. Similar penalties could be levelled against the employer and Mr Musk for this conduct.

Since the potential exposure for a business in these kinds of claims is limitless, it is reasonably rare for these matters to be arbitrated by the FWC, with many parties opting for the oversight of the courts.

 

Practicalities for employers

Given the above, it may seem like participating in “industrial activity” gives employees free reign to do as they please.

This is not strictly true – the High Court has confirmed on several occasions that the mere fact that an employee has engaged in industrial activities does not grant them immunity from disciplinary action if they commit acts of misconduct during those activities.

However, the distinction between dismissing an employee “because of” their industrial activities, and dismissing and employee “because of” misconduct which happened to occur in the course of their industrial activities, is extremely difficult to navigate in a way that effectively mitigates the risk to the business.

If care is not taken when dealing with employees who engage in industrial activities, it can expose businesses to one of the most wide-reaching types of litigation available under Australian industrial law. If a claim has been made against your business, you should obtain professional legal assistance to understand your options.

 

If you have any concerns about the what any of the matters discussed above mean for your business, please contact NRA Legal for a confidential discussion on 1800 572 679.